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UBC Theses and Dissertations

Towards a framework for identifying propulsive industries in advanced metropolitan economies Kahnert, Brian Joseph 1988

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TOWARDS A FRAMEWORK FOR IDENTIFYING PROPULSIVE INDUSTRIES IN ADVANCED METROPOLITAN ECONOMIES by BRIAN JOSEPH KAHNERT B . S c , The U n i v e r s i t y Of B r i t i s h C o lumbia, 1980 A THESIS SUBMITTED IN PARTIAL FULFILMENT OF THE REQUIREMENTS FOR THE DEGREE OF M.SC. in THE FACULTY OF GRADUATE STUDIES S c h o o l Of Community And R e g i o n a l P l a n n i n g We a c c e p t t h i s t h e s i s as c o n f o r m i n g t o the r e q u i r e d s t a n d a r d THE UNIVERSITY OF BRITISH COLUMBIA August 1988 © B r i a n Joseph K a h n e r t , 1988 In p r e s e n t i n g t h i s t h e s i s i n p a r t i a l f u l f i l m e n t of the r e q u i r e m e n t s f o r an advanced degree a t the U n i v e r s i t y of B r i t i s h C o l umbia, I agree t h a t the L i b r a r y s h a l l make i t f r e e l y a v a i l a b l e f o r r e f e r e n c e and s t u d y . I f u r t h e r agree t h a t p e r m i s s i o n f o r e x t e n s i v e c o p y i n g of t h i s t h e s i s f o r s c h o l a r l y purposes may be g r a n t e d by the Head of my Department or by h i s or her r e p r e s e n t a t i v e s . I t i s u n d e r s t o o d t h a t c o p y i n g or p u b l i c a t i o n of t h i s t h e s i s f o r f i n a n c i a l g a i n s h a l l not be a l l o w e d w i t h o u t my w r i t t e n p e r m i s s i o n . Department of S c h o o l Of Community And R e g i o n a l P l a n n i n g The U n i v e r s i t y of B r i t i s h Columbia 2075 Wesbrook P l a c e Vancouver, Canada V6T 1W5 Date: 31 August 1988 i i A b s t r a c t The r o l e of i n d u s t r i e s and f i r m s i n p r o p e l l i n g urban economic growth and change i s an i m p o r t a n t i s s u e i n urban economic r e s e a r c h and p o l i c y . A framework f o r i d e n t i f y i n g p r o p u l s i v e i n d u s t r i e s i n advanced m e t r o p o l i t a n economies i s proposed. A p r o p u l s i v e i n d u s t r y i s a s e t of f i r m s , p r o d u c i n g s u b s t i t u t a b l e goods or s e r v i c e s , which s i g n i f i c a n t l y i n f l u e n c e s urban economic growth and change. The framework examines the o p p o r t u n i t i e s and l i m i t s i n i d e n t i f y i n g p r o p u l s i v e i n d u s t r i e s u s i n g e x i s t i n g c o n c e p t s and d a t a from urban, r e g i o n a l and i n d u s t r i a l economic r e s e a r c h . I n i t i a l l y , i n d u s t r y c h a r a c t e r i s t i c s p r o p e l l i n g urban economic growth and change are d e s c r i b e d . These c h a r a c t e r i s t i c s f a l l i n t o two c a t e g o r i e s : p r o p u l s i v e mechanisms which d i r e c t l y s t i m u l a t e urban income and employment growth; and economic f a c t o r s which cause p r o p u l s i v e mechanisms t o change over t i m e . The a n a l y s i s shows how n i n e c h a r a c t e r i s t i c s can be t u r n e d i n t o c r i t e r i a f o r i d e n t i f y i n g l o c a l p r o p u l s i v e i n d u s t r i e s : i n d u s t r y s i z e , growth performance, average employee e a r n i n g s , o c c u p a t i o n a l p r o f i l e , m u l t i p l i e r performance, e x p o r t o r i e n t a t i o n , v u l n e r a b i l i t y t o import p e n e t r a t i o n of domestic m a r k e t s , and s e n s i t i v i t y t o economic r e c e s s i o n and e x p a n s i o n . Two a d d i t i o n a l i n d u s t r y c h a r a c t e r i s t i c s are r e j e c t e d as c r i t e r i a f o r i d e n t i f y i n g p r o p u l s i v e i n d u s t r i e s because of inadequate q u a n t i t a t i v e measures ( i n n o v a t i o n i n t e n s i t y , and match of o c c u p a t i o n a l demand w i t h l o c a l unemployment). A t h i r d , i n d u s t r y c o n c e n t r a t i o n , i s r e j e c t e d because, of u n c e r t a i n t y i n the p r o p u l s i v e r e l a t i o n s h i p w i t h urban economic growth and change. The e f f i c a c y of u s i n g a v a i l a b l e d a t a f o r i d e n t i f y i n g p r o p u l s i v e i n d u s t r i e s i n m e t r o p o l i t a n Vancouver, B r i t i s h Columbia i s examined. Data a r e a v a i l a b l e f o r f i v e out of the n i n e proposed c r i t e r i a : i n d u s t r y s i z e , net employment growth, average weekly wages, and s e n s i t i v i t y t o economic r e c e s s i o n and e x p a n s i o n . A p r o v i s i o n a l r a n k i n g of p r o p u l s i v e i n d u s t r i e s u s i n g t h e s e f i v e c r i t e r i a shows the dominant r o l e of s e r v i c e s i n the m e t r o p o l i t a n Vancouver economy. F i n a l l y , f i n d i n g s on the o p p o r t u n i t i e s and l i m i t s f o r i d e n t i f y i n g l o c a l p r o p u l s i v e i n d u s t r i e s and i m p l i c a t i o n s f o r urban economic p o l i c y a re d i s c u s s e d . The n i n e proposed c r i t e r i a p r o v i d e a more comprehensive and a n a l y t i c a l approach f o r i d e n t i f y i n g p r o p u l s i v e i n d u s t r i e s than methods p r e s e n t l y used by l o c a l economic p o l i c y m a k e r s . A v a i l a b l e d a t a a r e , however, inadequate f o r i d e n t i f y i n g p r o p u l s i v e i n d u s t r i e s i n m e t r o p o l i t a n Vancouver. I n f o r m a t i o n on l o c a l p r o p u l s i v e i n d u s t r i e s can be used t o s e t p r i o r i t i e s among an i n c r e a s i n g l y complex and d i v e r s e a r r a y of urban economic growth programs; e v a l u a t e the e f f i c a c y of implemented programs; and m o n i t o r and e v a l u a t e changes i n urban economic s t r u c t u r e . M e t r o p o l i t a n governments c o u l d p r o v i d e a v i t a l forum f o r economic r e s e a r c h and p o l i c y i n i t i a t i v e s i n v o l v i n g the i d e n t i f i c a t i o n and s u p p o r t of l o c a l p r o p u l s i v e i n d u s t r i e s . i v T a b l e of C o n t e n t s A b s t r a c t . i i L i s t of T a b l e s v i Acknowledgement v i i Chapter I THESIS INTRODUCTION AND OVERVIEW 1 1.1 Research Purpose 1 1.2 Problem Statement 1 1.3 T h e s i s C o n t e x t : S t r u c t u r a l And S p a t i a l Change In Advanced M e t r o p o l i t a n Economies 4 1.3.1 Urban S t r u c t u r a l And S p a t i a l Economic Change 5 1.3.2 D e t e r m i n a n t s Of Urban Economic Change 7 1.3.3 P o l i c y Response To S t r u c t u r a l Change In Urban Economies 13 1.4 T h e s i s O u t l i n e 21 Chapter I I AN EXPLORATION OF THE PROPULSIVE CHARACTERISTICS OF INDUSTRIES 25 2.1 I n t r o d u c t i o n 25 2.2 The P r o p u l s i v e Mechanisms Of I n d u s t r i a l P r o d u c t i o n 27 2.2.1 The E f f e c t s Of I n d u s t r y S i z e And Growth On O v e r a l l Urban Income And Employment 27 2.2.2 I n d u s t r y E f f e c t s On The D i s t r i b u t i o n Of Urban Income And Employment 29 2.2.3 T r a n s m i t t i n g Growth Impulses Through I n t e r -I n d u s t r y L i n k a g e s 35 2.3 Economic F a c t o r s Which Change P r o p u l s i v e Mechanisms Over Time 40 2.3.1 T e c h n o l o g i c a l I n n o v a t i o n 40 2.3.2 Market O r i e n t a t i o n 50 2.3.3 S e n s i t i v i t y To The B u s i n e s s C y c l e 57 2.3.4 O l i g o p o l y 62 2.4 C o n c l u s i o n s 68 Chapter I I I FORMULATING CRITERIA FOR IDENTIFYING PROPULSIVE INDUSTRIES 76 3.1 I n t r o d u c t i o n 76 3.2 C r i t e r i a For I d e n t i f y i n g P r o p u l s i v e I n d u s t r i e s ....78 3.2.1 I n d u s t r y S i z e 78 3.2.2 Growth Performance 78 3.2.3 Average Worker E a r n i n g s 79 3.2.4 Employment E a r n i n g s P r o f i l e 80 3.2.5 Match Of O c c u p a t i o n a l Demand W i t h L o c a l Unemployment 82 3.2.6 M u l t i p l i e r Performance 83-3.2.7 I n n o v a t i o n I n t e n s i t y 85 3.2.8 E x p o r t O r i e n t a t i o n 88 3.2.9 V u l n e r a b i l i t y To Import P e n e t r a t i o n Of Domestic V Markets 89 3.2.10 S e n s i t i v i t y To The B u s i n e s s C y c l e 90 3.2.11 I n d u s t r y C o n c e n t r a t i o n 91 3.3 U s i n g C r i t e r i a To I d e n t i f y P r o p u l s i v e I n d u s t r i e s ..94 3.4 C o n c l u s i o n s 96 Chapter IV A SURVEY OF EXISTING DATA FOR IDENTIFYING PROPULSIVE INDUSTRIES IN METROPOLITAN VANCOUVER, B.C 102 4.1 I n t r o d u c t i o n 102 4.2 E x i s t i n g Data On P r o p u l s i v e I n d u s t r i e s In M e t r o p o l i t a n Vancouver 104 4.2.1 I n d u s t r y S i z e 104 4.2.2 I n d u s t r y Growth Performance 109 4.2.3 Average Worker E a r n i n g s 111 4.2.4 M u l t i p l i e r Performance 113 4.2.5 S e n s i t i v i t y To The B u s i n e s s C y c l e 116 4.2.6 I n d u s t r y Data Aggregated At The P r o v i n c i a l And N a t i o n a l L e v e l s 120 4.3 U s i n g E x i s t i n g Data In A P r o v i s i o n a l I d e n t i f i c a t i o n Of P r o p u l s i v e I n d u s t r i e s In Vancouver 123 4.4 C o n c l u s i o n s 128 Chapter V THESIS CONCLUSIONS AND IMPLICATIONS FOR URBAN ECONOMIC POLICY 133 5.1 The O p p o r t u n i t i e s And L i m i t s In I d e n t i f y i n g L o c a l P r o p u l s i v e I n d u s t r i e s 134 5.2 The I m p l i c a t i o n s Of I d e n t i f y i n g P r o p u l s i v e I n d u s t r i e s For Urban Economic P o l i c y ....139 BIBLIOGRAPHY 148 v i L i s t of T a b l e s 1. C y c l i c a l Economic E x p a n s i o n s i n Canada 1953-1983. s o u r c e : Dept. F i n . 1 984 p.9 58 2. C y c l i c a l Economic R e c e s s i o n s i n Canada 1953-1983. s o u r c e : Dept. F i n . 1 984.p.10 59 3. Annual Average Employment i n Vancouver I n d u s t r i e s , 1981-1986 106 4. Value-Added i n Vancouver I n d u s t r i e s , 1981-1984 107 5. Summary S t a t i s t i c s on I n d u s t r y S i z e by T o t a l Employment i n 1986 1 08 6. Employment Growth Performance i n Vancouver I n d u s t r i e s , 1981-1986 110 7. Average Weekly E a r n i n g s f o r I n d u s t r i e s i n M e t r o p o l i t a n Vancouver, 1986 112 8. Employment and S a l e s M u l t i p l i e r s f o r M e t r o p o l i t a n Vancouver I n d u s t r i e s , 1971 115 9. I n d u s t r y S e n s i t i v i t y t o R e c e s s i o n , 1981-1984 118 10. I n d u s t r y S e n s i t i v i t y t o Recovery, 1984-1986 119 11. Summary of A v a i l a b l e Data on P r o p u l s i v e I n d u s t r i e s i n M e t r o p o l i t a n Vancouver, 1981-1986 125 12. The P r o p u l s i v e Ranks of I n d u s t r i e s i n M e t r o p o l i t a n Vancouver, 1981-1986 126 13. M e t r o p o l i t a n Vancouver I n d u s t r i e s Ranked by O v e r a l l P r o p u l s i v e Performance 127 v i i Acknowledgement T h i s t h e s i s i s d e d i c a t e d t o my g i r l f r i e n d C o r l e n e M c l l r o y and my f a t h e r E r i e K a h n e r t . T h e i r t o t a l and u n c o n d i t i o n a l support and encouragement was v i t a l t o the s u c c e s s f u l c o m p l e t i o n of t h i s t h e s i s . I want t o thank Tom Hutton (Economic Development O f f i c e , C i t y of Vancouver) f o r s h a r i n g h i s knowledge of urban economic r e s e a r c h and p o l i c y ; O t t o Rnauf (Employment and I m m i g r a t i o n Canada, Vancouver) f o r p r o v i d i n g v a l u a b l e d a t a and i n s i g h t s on employment t r e n d s i n Vancouver; and P h i l Mondor ( P l a n n i n g Department, C i t y of Vancouver) f o r a d v i c e and comments on e d i t i n g the f i n a l t h e s i s d r a f t . 1 I . THESIS INTRODUCTION AND OVERVIEW 1 .1 Research Purpose T h i s t h e s i s proposes a framework f o r i d e n t i f y i n g p r o p u l s i v e i n d u s t r i e s i n advanced m e t r o p o l i t a n economies. A p r o p u l s i v e i n d u s t r y i s a s e t of f i r m s , p r o d u c i n g s u b s t i t u t a b l e goods or s e r v i c e s ( S t a t i s t i c s Canada 1980 p . 2 ) , which s i g n i f i c a n t l y i n f l u e n c e s urban economic growth and change. The framework e x p l o r e s o p p o r t u n i t i e s and l i m i t s i n e x i s t i n g c o n c e p t s and d a t a f o r i d e n t i f y i n g and measuring the dynamic c h a r a c t e r i s t i c s of i n d u s t r i e s which s t i m u l a t e growth and change i n urban economies. A c r i t i c a l r e v i e w of c o n c e p t s s p e c i f y i n g c a u s a l r e l a t i o n s h i p s between i n d u s t r i e s and urban economic growth and change i s used as a b a s i s f o r f o r m u l a t i n g c r i t e r i a f o r i d e n t i f y i n g p r o p u l s i v e i n d u s t r i e s . A v a i l a b l e d a t a s o u r c e s are used i n an attempt t o i d e n t i f y p r o p u l s i v e i n d u s t r i e s i n m e t r o p o l i t a n Vancouver, B r i t i s h C o lumbia. I d e n t i f y i n g and m o n i t o r i n g l o c a l p r o p u l s i v e i n d u s t r i e s has i m p o r t a n t i m p l i c a t i o n s f o r p o l i c i e s p r omoting urban economic growth or adjustment t o s t r u c t u r a l economic change, and f o r e s t a b l i s h i n g urban economic r e s e a r c h p r i o r i t i e s . 1.2 Problem Statement The i d e n t i f i c a t i o n of p r o p u l s i v e i n d u s t r i e s r e p r e s e n t s a s i g n i f i c a n t r e s e a r c h c h a l l e n g e . T r a d i t i o n a l l y , urban economic growth t h e o r i e s and p o l i c i e s have been based on a g g r e g a t e measures of s u p p l y ( f o r example, l a b o u r , c a p i t a l and l a n d ) and demand ( l o c a l , n a t i o n a l and i n t e r n a t i o n a l m a r k e t s ) , and 2 a g g r e g a t e r e l a t i o n s h i p s between i n d u s t r i e s which e x p o r t and those p r o d u c i n g f o r l o c a l consumption (Thomas 1985 p.13). Both approaches a r e based on c o m p a r a t i v e s t a t i c e q u i l i b r i u m models which f a i l t o account f o r the dynamic s t r u c t u r e of urban economies and the fundamental r o l e of i n d u s t r i e s and f i r m s i n p r o p e l l i n g urban economic growth and change: ...economic growth i s n e i t h e r smooth nor r e g u l a r as suggested i n the e q u i l i b r i u m growth models, and i s c h a r a c t e r i z e d by s t r u c t u r a l change - the appearance and d i s a p p e a r a n c e of i n d u s t r i e s . . . t h e v a r y i n g p r o p o r t i o n of v a r i o u s i n d u s t r i e s i n t o t a l o u t p u t i n the c o u r s e of s u c c e s s i v e p e r i o d s . . . the d i f f e r e n t r a t e s of growth f o r d i f f e r e n t i n d u s t r i e s , d u r i n g one p e r i o d and i n s u c c e s s i v e p e r i o d s . . . the d i f f u s i o n of growth of an i n d u s t r y (or group of i n d u s t r i e s ) . ( F r a n c o i s P e r r o u x 1955. t r a n s l a t e d i n Gore 1984 p.85) C o n c e p t u a l f o u n d a t i o n s f o r i d e n t i f y i n g p r o p u l s i v e i n d u s t r i e s a r e found i n the work of the F r e n c h economist F r a n c o i s P e r r o u x who a t t e m p t e d t o e x p l a i n the causes of s t r u c t u r a l economic change. P e r r o u x ( 1 9 5 5 - t r a n s l a t e d i n 1981 p.182) s u g g e s t e d t h a t i n d u s t r i e s p r o p e l economic growth i n two ways: t h r o u g h i n d u s t r y growth which adds t o t o t a l economic a c t i v i t y ; . and by t r a n s m i t t i n g growth i m p u l s e s t o o t h e r i n d u s t r i e s t h r o u g h i n p u t - o u t p u t r e l a t i o n s h i p s . In subsequent r e s e a r c h by o t h e r s , the growth s t i m u l a t i n g e f f e c t s of i n t e r -i n d u s t r y l i n k a g e s has become a p r i n c i p a l c h a r a c t e r i s t i c f o r i d e n t i f y i n g p r o p u l s i v e i n d u s t r i e s ( f o r example, L e v e r 1980). P e r r o u x a l s o a d d r e s s e d the dynamic s t r u c t u r e of economies by s u g g e s t i n g t h a t the p r o p u l s i v e i n f l u e n c e s of an i n d u s t r y change over t i m e : D u r i n g any g i v e n p e r i o d , an economy which i s growing w i l l have some such . p r o p u l s i v e u n i t s . Over t i m e , a p a r t i c u l a r dominant u n i t , f o r example the t e x t i l e 3 i n d u s t r y , may l o s e i t s p r o p u l s i v e q u a l i t i e s , but i f growth i s t o be s u s t a i n e d , then i t w i l l be r e p l a c e d by o t h e r s , say the s t e e l or e l e c t r o n i c s i n d u s t r y , ( t r a n s l a t e d i n Gore 1984 p.86) The p r o p u l s i v e c h a r a c t e r i s t i c s of an i n d u s t r y a r e dynamic and i d e n t i f y i n g l o c a l p r o p u l s i v e i n d u s t r i e s r e q u i r e s i n s i g h t i n t o f a c t o r s which s t i m u l a t e i n d u s t r y growth and change over t i m e . I d e n t i f y i n g p r o p u l s i v e i n d u s t r i e s i n v o l v e s measuring the d i f f e r e n c e s between i n d u s t r i e s i n : s t i m u l a t i n g growth i n l o c a l income and employment; and economic f a c t o r s which change an i n d u s t r y ' s a b i l i t y t o p r o p e l economic growth over the s h o r t t o l o n g r u n . S i n c e P e r r o u x ' s work i n the 1950s, many r e s e a r c h e r s have a n a l y z e d p r o p u l s i v e i n d u s t r i e s w i t h c o n s i d e r a b l e a t t e n t i o n b e i n g g i v e n t o the i d e n t i f i c a t i o n of a p p r o p r i a t e v e h i c l e s f o r promoting n a t i o n a l , r e g i o n a l and urban economic expansion' ( B o u d e v i l l e 1966; Sweet 1969; R i c h a r d s o n 1969; Hermansen 1972a; E r i c k s o n 1974; Steed 1982; George 1983; Vesper 1983; Hutton 1985; S a v o i e 1986). There remain s u b s t a n t i a l c h a l l e n g e s i n i d e n t i f y i n g p r o p u l s i v e i n d u s t r i e s e s p e c i a l l y w i t h i n the framework of economic development p o l i c y (George, 1983). Watson (1984 p.207) contends t h a t f e d e r a l i n s t i t u t i o n s i n Canada do not p o s s e s s the i n f o r m a t i o n needed t o i d e n t i f y p r o p u l s i v e i n d u s t r i e s : ... what c o n s t i t u t e s j u d i c i o u s c h o i c e ? E x a c t l y what c r i t e r i a s h o u l d govern the c h o i c e ? How a r e we t o t e l l w hich i n d u s t r i e s w i l l p r o s p e r f i v e and ten y e a r s from now? At the same t i m e , promoting i n d u s t r y growth or adjustment t o s t r u c t u r a l economic change i s an e s s e n t i a l a c t i v i t y i n economic 4 p o l i c y a t the urban, r e g i o n a l , p r o v i n c i a l and n a t i o n a l l e v e l i n Canada. Important i n s i g h t s f o r economic growth and adjustment  p o l i c i e s c o u l d be g a i n e d from a b e t t e r u n d e r s t a n d i n g of the  o p p o r t u n i t i e s and l i m i t a t i o n s f o r i d e n t i f y i n g i n d u s t r i e s which  e x h i b i t s t r o n g p r o p u l s i v e c h a r a c t e r i s t i c s . The f o l l o w i n g q u e s t i o n s w i l l be add r e s s e d i n t h i s t h e s i s . What a r e the b a s i c mechanisms t h r o u g h which i n d u s t r i e s p r o p e l urban economic growth and change? What k i n d s of economic f a c t o r s modify these b a s i c p r o p u l s i v e mechanisms over the s h o r t t o l o n g run? How can e x i s t i n g c o n c e p t s on p r o p u l s i v e c h a r a c t e r i s t i c s be t u r n e d i n t o c r i t e r i a f o r i d e n t i f y i n g p r o p u l s i v e i n d u s t r i e s ? To what e x t e n t can a v a i l a b l e d a t a be used t o i d e n t i f y p r o p u l s i v e i n d u s t r i e s i n m e t r o p o l i t a n Vancouver, B r i t i s h Columbia? 1.3 T h e s i s C o n t e x t : S t r u c t u r a l And S p a t i a l Change In Advanced  M e t r o p o l i t a n Economies Advanced m e t r o p o l i t a n economies such as Vancouver a r e e x p e r i e n c i n g unprecedented s t r u c t u r a l and s p a t i a l change. The p a t t e r n s and d e t e r m i n a n t s of contemporary urban economic change p r o v i d e a c o n t e x t f o r an a n a l y s i s of the o p p o r t u n i t i e s and l i m i t s f o r i d e n t i f y i n g l o c a l p r o p u l s i v e i n d u s t r i e s . 5 1.3.1 Urban S t r u c t u r a l And S p a t i a l Economic Change Over the p a s t two decades advanced m e t r o p o l i t a n economies have e x p e r i e n c e d a s h i f t t o a p o s t i n d u s t r i a l economic s t r u c t u r e i n which s e r v i c e i n d u s t r i e s p l a y a dominant r o l e over m a n u f a c t u r i n g . The r e s t r u c t u r i n g of urban economies i n v o l v e s a r e l a t i v e and, more r e c e n t l y , an a b s o l u t e d e c l i n e i n employment i n many m a n u f a c t u r i n g i n d u s t r i e s . S u b s t a n t i a l d e c l i n e i n employment i n mature m a n u f a c t u r i n g i n d u s t r i e s i s e v i d e n t i n the Canadian economy: A l t h o u g h a b s o l u t e employment i n m a n u f a c t u r i n g g e n e r a l l y i n c r e a s e d u n t i l 1981, the e n s u i n g r e c e s s i o n and p l a n t m o d e r n i z a t i o n e l i m i n a t e d about one q u a r t e r m i l l i o n m a n u f a c t u r i n g j o b s , and fewer people a r e employed today i n m a n u f a c t u r i n g than a decade ago...In r e l a t i v e terms, the share of employment commanded by p r i m a r y and secondary i n d u s t r y a c t i v i t i e s shrank over the l a s t decade from 36 p e r c e n t t o l e s s than 30 p e r c e n t of t o t a l Canadian employment (Economic C o u n c i l of Canada 1984 p.67). S i m i l a r t r e n d s i n the r e l a t i v e employment d e c l i n e i n m a n u f a c t u r i n g i n d u s t r i e s a r e e v i d e n t i n the U.S. ( B l u e s t o n e and H a r r i s o n 1982 p.3; H a l l 1986) and the U.K. (Keeble 1980; Massey and Meegan 1982). The d e c l i n e of m a n u f a c t u r i n g employment i n advanced m e t r o p o l i t a n economies i s c o u p l e d w i t h s i g n i f i c a n t employment growth i n urban s e r v i c e i n d u s t r i e s . In Canada, s e r v i c e i n d u s t r i e s a r e the dominant source of employment growth c r e a t i n g most of the 2 m i l l i o n new j o b s i n Canada between 1973 and .1983: Today, s e r v i c e s e c t o r j o b s i n c l u d i n g those i n t r a n s p o r t a t i o n and t r a d e , account f o r more than 70 per c e n t of employment i n Canada (Economic C o u n c i l of Canada, 1984 p.67). 6 Between 1961 and 1980, community, b u s i n e s s and p e r s o n a l s e r v i c e s had the h i g h e s t employment growth r a t e i n 22 census m e t r o p o l i t a n a r e a s i n Canada (D a v i s and Hutton 1981 p.19). T h i s s e c t o r was f o l l o w e d by f i n a n c e , i n s u r a n c e and r e a l e s t a t e , t r a d e and t r a n s p o r t , u t i l i t i e s and communications, a l l of which grew f a s t e r than m a n u f a c t u r i n g . In the U.S., s e r v i c e i n d u s t r i e s have d i s p l a c e d m a n u f a c t u r i n g as the p r i n c i p a l economic a c t i v i t y . P r o ducer s e r v i c e s and the n o n - p r o f i t s e c t o r s t r o n g l y i n f l u e n c e the growth of .the American economy ( N o y e l l e , 1983 p.282; G i n z b e r g and V o j t a , 1981 p .52). Urban economies a r e a l s o e x p e r i e n c i n g changes i n the l o c a t i o n of m a n u f a c t u r i n g and s e r v i c e i n d u s t r i e s . M a n u f a c t u r i n g and i n c r e a s i n g l y s e r v i c e s are moving from c e n t r a l c i t y l o c a t i o n s t o the suburbs ( P h i l l i p s and V i d a l 1983; H u t t o n 1983 p . 5 6 ) , s m a l l e r r e g i o n a l c e n t e r s (Young and M i l l s 1982; P h i l l i p s and V i d a l 1983; Norton and Rees 1979 p.142; B l u e s t o n e and H a r r i s o n 1982 p.33), and t o newly i n d u s t r i a l i z e d n a t i o n s i n the t h i r d w o r l d (Keeble 1980 p.954; R o t h w e l l 1982 p.362; B l u e s t o n e and H a r r i s o n 1982 p.33). The l o s s of m a n u f a c t u r i n g employment i n l a r g e c i t i e s i s most a c u t e i n the U.K. (Keeble 1980 p.946) and the U.S. ( S c o t t 1982a p.122; Burns and VanNess 1981; P h i l l i p s and V i d a l 1983; B l u e s t o n e and H a r r i s o n 1982). The growth of the s e r v i c e economy i s an e s s e n t i a l l y urban phenomenon (Stanback 1979; D a v i s and Hutton 1981 p.16). S e r v i c e s e c t o r a c t i v i t y i s unevenly d i s t r i b u t e d w i t h i n c i t i e s and a l s o between c i t i e s . P roducer and n o n - p r o f i t s e r v i c e s a r e s t r o n g l y a t t r a c t e d t o the c e n t r a l c i t y and CBD. R o u t i n e o f f i c e 7 f u n c t i o n s , w h o l e s a l e and r e t a i l t r a d e a r e i n c r e a s i n g l y d i s p e r s i n g t o the suburbs ( E d g i n g t o n , 1982 p.287; Ley and H u t t o n , 1983). N a t i o n a l and r e g i o n a l urban c e n t e r s have emerged as l o c a t i o n s i n which s e r v i c e i n d u s t r i e s a r e c o n c e n t r a t e d . Important n a t i o n a l c e n t e r s such as Tor o n t o ( B r i t t o n 1981) and t o a l e s s e r degree Vancouver ( C i t y of Vancouver 1985) are c h a r a c t e r i z e d by h i g h c o n c e n t r a t i o n s of advanced s e r v i c e s ( c o r p o r a t e , n o n - p r o f i t , p u b l i c and d i s t r i b u t i v e ) ( N o y e l l e 1983b p.125-126). S e c o n d l y , some c i t i e s a r e emerging as i m p o r t a n t r e g i o n a l c e n t e r s t h r o u g h the l o c a t i o n of s p e c i a l i z e d s e r v i c e s such as c o r p o r a t e h e a d q u a r t e r s or p u b l i c s e c t o r f a c i l i t i e s ( N o y e l l e , 1983a). The e x p e r i e n c e s of d i f f e r e n t urban economies i n terms of the pace and the s c a l e of s t r u c t u r a l and s p a t i a l change are h i g h l y v a r i a b l e ( D a v i s and H u t t o n , 1981). S t r u c t u r a l and s p a t i a l economic change has s i g n i f i c a n t n e g a t i v e e f f e c t s on l a r g e c i t i e s dependent on m a n u f a c t u r i n g i n d u s t r i e s w i t h mature and/or d e c l i n i n g p r o d u c t markets ( S c o t t 1983a p.134). In many c i t i e s , employment growth i n s e r v i c e s has not r e p l a c e d l o s s e s i n m a n u f a c t u r i n g employment (Norton and Rees 1979 p.143; D a n i e l s 1983 p.302). 1.3.2 D e t e r m i n a n t s Of Urban Economic Change The f o r c e s i n f l u e n c i n g the s c a l e and pace of urban economic change a r e complex and dynamic. T h e o r i e s a n a l y z i n g urban economic change, c r i t i c a l economic t r e n d s and key urban c h a r a c t e r i s t i c s a r e d i s c u s s e d b r i e f l y below i n o r d e r t o p r o v i d e 8 i n s i g h t i n t o the d i v e r s e f o r c e s i n f l u e n c i n g urban economic change. (a) Contemporary T h e o r i e s of Urban Economic Development Attempts at f o r m u l a t i n g comprehensive t h e o r i e s of urban economic development are confounded by high l e v e l s of v a r i a b i l i t y i n the s t r u c t u r e of i n d u s t r i e s and markets, i n i n d u s t r y and f i r m performance and by the unique s t r u c t u r e s of d i f f e r e n t urban economies. Two a l t e r n a t i v e t h e o r i e s are presented i n order to provide i n s i g h t i n t o i n d u s t r y p r o d u c t i o n and l o c a t i o n dynamics. The dynamic nature of the product c y c l e / l o c a t i o n a l s p e c i a l i z a t i o n theory p r o v i d e s notable i n s i g h t s i n t o the ongoing process of i n d u s t r i a l d i f f u s i o n i n advanced m e t r o p l i t a n economies: In the e a r l y or i n n o v a t i o n stage of a product's l i f e c y c l e , p r o d u c t i o n r e q u i r e s R and D and s k i l l e d labour f o r refinements and improvements. The second or growth stage permits p r o d u c t i o n to be l e s s s k i l l -i n t e n s i v e and to take p l a c e away from R and D c e n t e r s . The f i n a l or s t a n d a r d i z a t i o n stage i s c h a r a c t e r i z e d by s h i f t s i n pr o d u c t i o n to low c o s t ( e s p e c i a l l y low wage) l o c a t i o n s ( M a l e c k i , 1983 p.100). In the i n i t i a l and growth phases of the product c y c l e , p r o d u c t i o n i s conc e n t r a t e d i n l a r g e urban c e n t e r s to capture agglomeration economies such as h i g h l y s k i l l e d labour and pr o x i m i t y to changing markets and s u p p l i e r s ( S c o t t , 1982a p. 124; Markusen, 1985 p.45). As markets and s u p p l i e r s become l a r g e r and more c e r t a i n and p r o d u c t i o n a c t i v i t i e s become more r o u t i n i z e d , f i r m s become l e s s dependent- on c e n t r a l c i t y l o c a t i o n s . In mature markets, i n c r e a s i n g p r i c e c o mpetition and 9 d e c l i n i n g p r o f i t s f o r c e f i r m s to i n c r e a s e p r o d u c t i o n s c a l e and s t a n d a r d i z e p r o d u c t i o n p r o c e s s e s . Production i n v o l v e s p r o g r e s s i v e l y l e s s r e s e a r c h and design and more s e m i - s k i l l e d l a b o u r . Firms sear c h i n g f o r o p p o r t u n i t i e s to cut p r o d u c t i o n c o s t s move s t a n d a r d i z e d p r o d u c t i o n a c t i v i t i e s to the suburbs or s m a l l e r urban c e n t e r s to take advantage of lower labour c o s t s ( S c o t t , 1982a p.124; Markusen, 1985 p.45). Sc o t t (1982a p.131) proposes an a l t e r n a t i v e theory which emphasises the i n f l u e n c e of t e c h n o l o g i c a l change and the s u b s t i t u t i o n of c a p i t a l f o r labour: In recent decades i n l a r g e m e t r o p o l i t a n r e g i o n s , core areas have tended to have a comparative advantage f o r labour i n t e n s i v e i n d u s t r i a l a c t i v i t i e s while p e r i p h e r a l areas have tended to have a compartive advantage for c a p i t a l i n t e n s i v e i n d u s t r i a l a c t i v i t i e s . Confronted with r e c e s s i o n , i n c r e a s i n g competition and d e c l i n i n g p r o f i t s , l a r g e firms have sought to r a t i o n a l i z e , d i s p e r s e and d i v e r s i f y p r o d u c t i o n p r o c e s s e s . T h i s t r e n d a c c e l e r a t e d d u r i n g the 1970s with the onset of " s t a g f l a t i o n . " These a c t i o n s are undertaken by mature manufacturing i n d u s t r i e s i n order to boost p r o f i t s , i n c r e a s e c o r p o r a t e growth or reduce c o r p o r a t e r i s k (Bluestone and H a r r i s o n , 1982 p.40; Howe 1978 p.145). R a t i o n a l i z i n g , d i s p e r s i n g and d i v e r s i f i n g a c t i v i t i e s w i t h i n i n d u s t r i e s and f i r m s c o n t r i b u t e s to employment d e c l i n e i n the c e n t r a l c i t y and new p l a n t and employment growth in the suburbs or h i n t e r l a n d . R a t i o n a l i z i n g p r o d u c t i o n processes i n v o l v e s s u b s t i t u t i n g c a p i t a l f o r labour. T h i s s u b s t i t u t i o n i n c r e a s e s the r o l e of s e r v i c e f u n c t i o n s i n p r o d u c t i o n ( d e s i g n i n g , implementing 10 and managing t e c h n o l o g i c a l i n n o v a t i o n , a d m i n i s t r a t i o n , i n v e n t o r y c o n t r o l , . . . ) . Employment and o u t p u t growth i n urban s e r v i c e a c t i v i t i e s i s o c c u r r i n g i n p a r t a t the d i r e c t expense of m a n u f a c t u r i n g employment ( H i r s c h h o r n 1979 p.110; Burke 1975 p.26). N o y e l l e (1983 p.282) o b s e r v e s : In terms of how the economy pr o d u c e s , the importance of b o t h s e r v i c e s t o p r o d u c e r s and p r o d u c e r - l i k e a c t i v i t i e s c a r r i e d out w i t h i n the c e n t r a l o f f i c e s of the l a r g e c o r p o r a t i o n s has grown tremendously r e f l e c t i n g the need of l a r g e c o r p o r a t i o n s t o devote g r e a t e r r e s o u r c e s t o r e s e a r c h and development, t o the p l a n n i n g of d i f f e r e n t phases of the p r o d u c t c y c l e , t o e n g i n e e r i n g , b r a n d i n g , c u s t o m i z i n g and s t y l i n g , and t o the management of the c o r p o r a t e i n s t i t u t i o n ' s growing c o m p l e x i t y . The s u b s t i t u t i o n of c a p i t a l f o r l a b o u r has l e d t o a r e d u c t i o n i n t h e dependence of l a r g e f i r m s on c e n t r a l urban p l a c e s ( S c o t t , 1982b p.192). C o r p o r a t i o n s grow i n p a r t t h r o u g h the a b i l i t y t o c a p t u r e i n t e r n a l economies of s c a l e i n the v e r t i c a l i n t e g r a t i o n of p r o d u c t i o n and management f u n c t i o n s . As growth o c c u r s , the s c a l e of i n p u t s and o u t p u t s i n c r e a s e s and l i n k a g e s between management and p r o d u c t i o n become s t a n d a r d i z e d and r o u t i n e ( S c o t t 1982a p.127; E d g i n g t o n 1982 p.287). Large c a p i t a l i n t e n s i v e f i r m s d i s p e r s e r o u t i n e p r o d u c t i o n a c t i v i t i e s t o p e r i p h e r a l urban l o c a t i o n s and c o n c e n t r a t e m a n a g e r i a l a c t i v i t i e s i n the c e n t r a l c i t y . S m a l l , l a b o u r i n t e n s i v e f i r m s and a c t i v i t i e s w i t h h i g h l y v a r i a b l e i n p u t and output, l i n k a g e s r e t a i n a s t r o n g a t t r a c t i o n f o r c e n t r a l urban p l a c e s . A dependence on the r a p i d d i s s e m i n a t i o n of market i n f o r m a t i o n , the a v a i l a b i l i t y of l a b o u r and the h i g h r a t e of f i r m f a i l u r e i n d u c e s new and f r e q u e n t l y s m a l l m a n u f a c t u r i n g f i r m s t o seek out c e n t r a l c i t y l o c a t i o n s 11 ( S c o t t , 1982a p.127). Producer and n o n - p r o f i t s e r v i c e a c t i v i t i e s a r e a l s o l a b o u r i n t e n s i v e and s t r o n g l y a t t t r a c t e d t o the c e n t r a l c i t y and CBD ( S c o t t 1982b p.195; D a v i s and Hutton 1983). F a c t o r s which promote l o c a t i o n a l c e n t r a l i t y i n h i g h e r o r d e r s e r v i c e s i n c l u d e : h i g h i n t e r f i r m communication c o s t s t o s e r v i c e n o n - s t a n d a r d l i n k a g e s and the need f o r f a c e t o f a c e c o n t a c t (Code 1979; Goddard and Pye 1977); p o s i t i v e e x t e r n a l economies d e r i v e d by c l o s e a c c e s s t o s p e c i a l i z e d i n f o r m a t i o n s e r v i c e s ; c a p i t a l i nvestment p r e f e r e n c e s of f i r m s and i n d i v i d u a l s which have t r a d i t i o n a l l y sought out CBD l o c a t i o n s ; a c c e s s i b i l i t y ; and i n t a n g i b l e f a c t o r s such as the p r e s t i g e and amenity v a l u e of the CBD which c r e a t e s o c i a l impediments t o d e c e n t r a l i z a t i o n among management (Ley and H u t t o n , 1983). (b) C r i t i c a l Trends i n Contemporary Economic Change. In a d d i t i o n t o i s s u e s r e l a t i n g t o the s t r u c t u r e , conduct and performance of f i r m s and i n d u s t r i e s , t h r e e t r e n d s which s i g n i f i c a n t l y i n f l u e n c e s t r u c t u r a l and s p a t i a l change i n advanced m e t r o p o l i t a n economies a r e : 1. i n c r e a s i n g i n t e r - f i r m c o m p e t i t i o n and d e c l i n i n g p r o f i t s brought on by r i s i n g i n t e r n a t i o n a l t r a d e and investment (Bergman and G o l d s t e i n , 1983; B l u e s t o n e and H a r r i s o n , 1982 p.141; G i n z b e r g and V o j t a , 1981 p.52; K e e b l e , 1980 p.953; S m i t h , 1984 p.1; Massey and Meegan, 1978); 2. a s e r i e s of c y c l i c a l economic r e c e s s i o n s and weak r e c o v e r i e s d u r i n g the 1970's and e a r l y 1980's; and 3. i n c r e a s i n g economic c o n c e n t r a t i o n w i t h i n l a r g e (and f r e q u e n t l y m u l t i - n a t i o n a l ) c o r p o r a t i o n s ( G i n z b e r g and V o j t a , 1981 p.53; N o y e l l e , 1983 p.281; Keeble 1980 p.953; 12 B l u e s t o n e and H a r r i s o n , 1982 p.119; Young and M i l l s , 1982 p.98; E d g i n g t o n , 1982 p.285; R o t h w e l l , 1982 p.364; The Globe and M a i l , August 25, 1984 p.B1). (c) Urban C h a r a c t e r i s t i c s I n f l u e n c i n g I n d u s t r i a l L o c a t i o n . C e n t r a l c i t y l o c a t i o n s a r e l e s s c r i t i c a l f o r many i n d u s t r i e s . There i s a broad d i v e r s i t y of f a c t o r s which push f i r m s out of the c e n t r a l c i t y and a t t r a c t f i r m s t o p e r i p h e r a l l o c a t i o n s . The d e c l i n e of t r a n s p o r t a t i o n and communication c o s t s r e l a t i v e t o p r o d u c t i o n c o s t s makes many f i r m s and i n d u s t r i e s i n c r e a s i n g l y f o o t l o o s e ( A l o n s o , 1975 p.58; S c o t t , 1982a p.127). The i n c r e a s i n g s i z e of a c i t y s t i m u l a t e s the d e c e n t r a l i z a t i o n and d i s p e r s a l of f i r m s ( S c o t t 1982a p.117). Other c o n d i t i o n s which reduce the a t t r a c t i o n of c e n t r a l c i t y l o c a t i o n s i n c l u d e ( S c o t t 1982a p.123) h i g h l a n d c o s t s , h i g h l a b o u r c o s t s , p l a n n i n g r e s t r i c t i o n s on i n d u s t r i a l a c t i v i t y , a s h o r t a g e of s i t e s and t r a f f i c c o n g e s t i o n . There i s a l s o a d i v e r s e s e t of f a c t o r s which a t t r a c t f i r m s t o the suburbs: i n c r e a s i n g demand f o r goods and s e r v i c e s by growing p o p u l a t i o n s ( D a v i s and H u t t o n , 1983; E d g i n g t o n , 1982 p.290; S c o t t 1982a p.123); l e s s e x p e n s i v e l a b o u r , and l e s s e x p e n s i v e and more p l e n t i f u l l a n d . P a t t e r n s of s t r u c t u r a l and s p a t i a l change a r e m a n i f e s t t o d i f f e r e n t degrees i n d i f f e r e n t c i t i e s . Each c i t y has a unique s e t of c h a r a c t e r i s t i c s which modify the n a t u r e and pace of economic change. These c h a r a c t e r i s t i c s may i n c l u d e the u n d e r l y i n g economic s t r e n g t h of the CBD and c e n t r a l c i t y ; the degree of development of m u l t i p l e urban c e n t e r s i n the r e g i o n a l 13 economic s t r u c t u r e ; the l e v e l and q u a l i t i e s of a m e n i t i e s i n the c e n t r a l c i t y ; and the i n f l u e n c e of p u b l i c p o l i c i e s and programs d e s i g n e d t o i n f l u e n c e the l o c a t i o n d e c i s i o n s of f i r m s ( D a v i s and Hutton 1983). 1.3.3 P o l i c y Response To S t r u c t u r a l Change In Urban Economies Unprecedented changes i n the s t r u c t u r e of urban economies d u r i n g the 1970s and 1980s and c o n c o m i t a n t economic, s o c i a l and f i s c a l problems ( S c o t t 1982a p.134) have r e s u l t e d i n i n c r e a s i n g p a r t i c i p a t i o n of m u n i c i p a l and m e t r o p o l i t a n governments i n p o l i c i e s p r o m o t i n g economic growth ( B r i t t o n 1981; Hutton 1983; Dunn 1984; Smith 1984). T h i s r e p r e s e n t s a s i g n i f i c a n t d e p a r t u r e from the t r a d i t i o n a l f o c u s of urban p l a n n i n g on l a n d - u s e and z o n i n g . L o c a l s u p p o r t f o r i n t e r v e n t i o n i s growing and l o c a l p o l i c y m a k e r s are i n c r e a s i n g l y aware of the scope f o r e f f e c t i v e , p o s i t i v e a c t i o n ( C i t y of Vancouver 1985c; Hutton 1983; Dunn 1984). Market f a i l u r e s such as the u n d e r - u t i l i z a t i o n of l o c a l r e s o u r c e s ( f o r example, l a b o u r ) and the poor r a t e of e s t a b l i s h m e n t of h i g h e r v a l u e - a d d e d and advance t e c h n o l o g y i n d u s t r i e s a r e used t o j u s t i f y economic and i n d u s t r i a l p o l i c y (George 1983 p.57; Watson 1984 p.204, C i t y of Vancouver 1985c p.1; M c F e t r i d g e 1985b p . 4 ) . L o c a l governments a r e i n t e r v e n i n g i n economic and i n d u s t r i a l p o l i c y i n p a r t because of the inadequacy of macroeconomic and r e g i o n a l development p o l i c i e s i n i t i a t e d by s e n i o r governments ( C i t y of Vancouver 1985c; S a v o i e 1986;^Steed 1982; Weaver and Gunton 1982). The Economic C o u n c i l of Canada 14 (Vancouver Sun, 3/3/88) s t a t e s t h a t over a b i l l i o n d o l l a r s has been wasted i n the p a s t 15 y e a r s on temporary a i d programs t o t e x t i l e , a u t o m o b i l e and o t h e r m a n u f a c t u r i n g i n d u s t r i e s . These programs have f a i l e d t o h e l p t h e s e i n d u s t r i e s modernize and a d j u s t t o new c o m p e t i t i v e p r e s s u r e s from i m p o r t s or new t e c h n o l o g y . In a second example, Hyundai Auto Canada I n c . was g i v e n $110 m i l l i o n i n f e d e r a l and p r o v i n c i a l a i d t o b u i l d an assembly p l a n t i n Quebec i n s p i t e of the f a c t t h a t Hyundai never asked f o r government a s s i s t a n c e , and would have b u i l t the p l a n t i n Quebec anyways (Vancouver Sun, 23/11/85 p.D10). The scope f o r l o c a l l e v e l i n t e r v e n t i o n i n the urban economy i s r e l a t i v e l y narrow. The a b i l i t y t o implement economic growth p o l i c i e s i s c o n s t r a i n e d by budget l i m i t a t i o n s and the l o c a l revenue base. The o p p o r t u n i t i e s f o r e s t a b l i s h i n g comprehensive economic p o l i c i e s a r e f u r t h e r c o n s t r a i n e d by a r e a l j u r i s d i c t i o n and a l i m i t e d a b i l i t y t o i n f l u e n c e n a t i o n a l and i n t e r n a t i o n a l economic f o r c e s and t r e n d s . S e n i o r l e v e l s of government p l a y a dominant r o l e i n many p o l i c y and program a r e a s ( f o r example, t r a d e , f i s c a l and monetary p o l i c y ) . C o n s u l t a t i o n and c o o p e r a t i o n w i t h s e n i o r governments, the p r i v a t e s e c t o r , l a b o u r and community groups i s e s s e n t i a l i n f o r m u l a t i n g and implementing e f f e c t i v e urban economic growth s t r a t e g i e s . Urban economic programs have i n c r e a s e d s i g n i f i c a n t l y i n d i v e r s i t y and c o m p l e x i t y d u r i n g the 1980s (Dunn 1984 p.6; Young and M i l l s 1982). L o c a l p o l i c y m a k e r s use a broad a r r a y of d i r e c t and i n d i r e c t programs t o p r o v i d e support f o r e x i s t i n g i n d u s t r i e s and f i r m s , and t o a t t r a c t new ones ( e s p e c i a l l y h i g h e r v a l u e -15 added and t e c h n o l o g y i n t e n s i v e i n d u s t r i e s ) . I n a r e c e n t review of urban economic p o l i c y , Dunn (1984) emphasises the c e n t r a l r o l e of i n d i r e c t programs which p r o v i d e g e n e r a l economic c o n d i t i o n s f a v o u r a b l e t o the growth of e x i s t i n g i n d u s t r i e s and the a t t r a c t i o n of new ones. He a l s o recommends e x p e r i m e n t a l management of s e l e c t i v e programs p r o v i d i n g d i r e c t s u p port t o l o c a l f i r m s (see a l s o C i t y of Vancouver 1985c; C i t y of Toronto 1980). The spectrum of programs used t o s t i m u l a t e urban economic growth by l o c a l p o l i c y m a k e r s i n c l u d e s : 1. M a i n t a i n i n g an adequate s u p p l y of l a n d f o r m a n u f a c t u r i n g , commercial and o f f i c e uses ( C i t y of Vancouver 1982; Township of Richmond 1986). 2. S t r e a m l i n i n g m u n i c i p a l l a n d - u s e and development r e g u l a t i o n s (Township of Richmond- 1986; C i t y of Vancouver 1985c p . 7 ) . 3. P r o v i d i n g i n f r a s t r u c t u r e and community s e r v i c e s . In a d d i t i o n t o t r a n s p o r t a t i o n and communication, programs i n c l u d e : f o s t e r i n g the i n c u b a t o r f u n c t i o n of the c e n t r a l c i t y ( B r i t t o n 1981; C i t y of Vancouver 1985c); and m a i n t a i n i n g h i g h q u a l i t y s e r v i c e s (such as s c h o o l s ) and a m e n i t i e s which a t t r a c t h i g h l y s k i l l e d p r o f e s s i o n a l and t e c h n i c a l workers ( M a l e c k i 1984). 4. M a r k e t i n g and promoting the c i t y t o a t t r a c t investment and f o o t l o o s e i n d u s t r i e s , and t o h e l p l o c a l i n d u s t r i e s and f i r m s i n d e v e l o p i n g new ( e s p e c i a l l y e x p o r t ) markets. The C i t y of Vancouver has a c t i v e l y engaged i n t r a d e m i s s i o n s t o P a c i f i c Rim c i t i e s i n o r d e r t o encourage j o i n t v e n t u r e s and investment w i t h key l o c a l f i r m s (Hutton 1985). 16 5. P r o v i d i n g f i n a n c i a l s u p p o r t t o e x i s t i n g f i r m s and i n c e n t i v e s t o a t t r a c t f o o t l o o s e i n d u s t r y . P r o p e r t y t a x br e a k s f o r new incoming i n d u s t r i e s and f i r m s a r e a common element i n most urban economic growth p o l i c i e s . Some urban c e n t e r s ( C i t y of Vancouver 1982, 1985bc) do not use d i r e c t s u b s i d i e s , but i n s t e a d f a c i l i t a t e c o n t a c t s between s o u r c e s of c a p i t a l and f i r m s r e q u i r i n g c a p i t a l . 6. Enhancing l o c a l i n v e s t m e n t s i n human c a p i t a l . S t r e n g t h e n i n g the employment and human r e s o u r c e s of urban economies by i n c r e a s i n g j o b s s k i l l s t r a i n i n g and f o s t e r i n g e n t r e p r e n e u r s h i p i s an i n c r e a s i n g l y i m p o r t a n t element of urban economic p o l i c y (Hutton 1983; Dunn 1984). Program o p t i o n s i n c l u d e the development of e d u c a t i o n a l and v o c a t i o n a l programs, a d j u s t i n g t a x e s t o f a v o u r c o r p o r a t e investment i n human r e s o u r c e development, a c t i n g as a l i a s o n between e d u c a t i o n a l i n s t i t u t e s and the m a r k e t p l a c e and s u p p o r t i n g community based economic growth a c t i v i t i e s (Hutton 1983 p.57; C i t y of Vancouver 1985c p.11; C i t y of Toronto 1980). 7. S t r e n g t h e n i n g the l o c a l s u p p o r t system f o r t e c h n o l o g i c a l i n n o v a t i o n . Programs i n c l u d e : the c o l l e c t i n g of i n f o r m a t i o n on l o c a l t e c h n o l o g i c a l i n f r a s t r u c t u r e ( S c i e n c e C o u n c i l of Canada 1984 p.57; C i t y of Vancouver 1985a p.16; Smith 1984 p.5) and on how l o c a l i n d u s t r i e s and f i r m s d e v e l o p and use t e c h n o l o g y (Wiewel e t a l 1984 p.295); and s t r e n g t h e n i n g the i n f o r m a t i o n l i n k a g e s between advanced e d u c a t i o n and r e s e a r c h c e n t e r s , and l o c a l i n d u s t r i e s and f i r m s (Smith 1984 p.5-6). The r e l a t i v e l y s h o r t h i s t o r y of urban economic p o l i c y has 17 been t o a l a r g e degree ad hoc, a t h e o r e t i c a l and n o n a n a l y t i c a l . The f a i l u r e t o f o r m u l a t e a p r a g m a t i c and a n a l y t i c a l s t r a t e g i c framework f o r g u i d i n g an i n c r e a s i n g l y complex a r r a y of economic growth programs i s a fundamental weakness of urban economic p o l i c y m a k i n g . In sum, i t i s w i d e l y a s s e r t e d t h a t l o c a l economic p o l i c y p l a n n i n g i n i t s p r e s e n t e v o l u t i o n a r y stage i s pursued a t the expense of sound a n a l y s i s , e x p l o r i n g o b j e c t i v e s and e f f e c t i v e n e s s , and c o o r d i n a t i o n and c a l l a b o r a t i o n . These d e f i c i e n c i e s p r e s e n t a r e a l c h a l l e n g e t o l o c a l economic p l a n n e r s i n the f o l l o w i n g a r e a s : j u s t i f y i n g p o l i c i e s i n terms of wider dynamics and t r e n d s (as w e l l as c o n d i t i o n s and o p p o r t u n i t i e s ) ; making e x p l i c i t the v a l u e s and assumptions b e h i n d the p o l i c y a pproach adopted; m o n i t o r i n g and e v a l u a t i o n ; and enhanced i m p l e m e n t a t i o n (Dunn 1984 p.13). In the absense of a comprehensive and a n a l y t i c a l s t r a t e g y f o r e n c o u r a g i n g economic growth, many urban p o l i c y m a k e r s have responded t o i n c r e a s i n g unemployment and a d e c l i n i n g t a x base w i t h b o o s t e r i s m (Vancouver Sun 27/5/85 p.A5). The economic growth s t r a t e g i e s proposed by many B.C. m u n i c i p a l i t i e s under the P a r t n e r s i n E n t e r p r i s e program (B.C. M u n i c i p a l A f f a i r s 1986) a r e an example of b o o s t e r i s m . These s t r a t e g i e s ( f o r example r e f e r t o Township of Richmond 1986; R e v e l s t o k e 1985) do not p r e s e n t any da t a on economic growth and change, or on the p r o p u l s i v e c h a r a c t e r i s t i c s of l o c a l i n d u s t r i e s . The programs emphasize p r o p e r t y t a x breaks f o r m a n u f a c t u r i n g i n d u s t r i e s , i n f r a s t r u c t u r e and m a r k e t i n g / p r o m o t i o n . Urban economic s t r a t e g i e s which r e l y on t a x or o t h e r f i s c a l c o n c e s s i o n s t o promote growth a r e not v i a b l e because they c o n t r i b u t e n o t h i n g t o n a t i o n a l economic growth; have l o s t t h e i r 18 u t i l i t y s i n c e every m u n i c i p a l i t y i s u s i n g them; a r e aimed a t c o n f l i c t i n g o b j e c t i v e s i n terms of employment d i s t r i b u t i o n and o f t e n c a n c e l each o t h e r o u t ; r e s u l t i n a "beggar t h y n e i g h b o r " p o l i c y based on c o m p e t i t i o n between m u n i c i p a l i t i e s ; u n f a i r l y s u b s i d i z e new f i r m s a t the expense of e x i s t i n g f i r m s which p r o v i d e a s u b s t a n t i a l p r o p o r t i o n of employment growth; r e p r e s e n t crude p a t c h e s which attempt t o m i t i g a t e d i s i n c e n t i v e s i n the t a x system; do not d e a l w i t h the fundamental c h a l l e n g e of s t i m u l a t i n g new employment growth; and have f a i l e d t o produce a s i g n i f i c a n t impact (Widner 1980; W i l l i s 1985). More i m p o r t a n t l y , w i t h o u t i n f o r m a t i o n on the p r o p u l s i v e c h a r a c t e r i s t i c s of l o c a l i n d u s t r i e s l o c a l p o l i c y m a k e r s a r e l i k e l y t o respond o n l y t o symptoms such as unemployment and a d e c l i n i n g t a x base r a t h e r than a d d r e s s i n g the r e a l problem, s t r u c t u r a l economic change. Coping w i t h s t r u c t u r a l economic change i s a fundamental c h a l l e n g e f o r economic p o l i c y m a k e r s a t the urban as w e l l as p r o v i n c i a l and f e d e r a l l e v e l s . W h i l e markets may w e l l be equipped t o handle i n c r e m e n t a l changes i n the s u p p l y and demand of p r o d u c t i o n i n p u t s and o u t p u t s , p u b l i c i n t e r v e n t i o n i s n e c e s s a r y t o f a c i l i t a t e a djustment t o the unprecedented s t r u c t u r a l changes e x p e r i e n c e d i n advanced m e t r o p o l i t a n economies d u r i n g the 1970s and 1980s (Dunn 1984: A t k i n s o n 1984 p.458). In p a r t i c u l a r , h e l p i n g l a b o u r a d j u s t t o s t r u c t u r a l economic change i s a v i t a l element of economic or i n d u s t r i a l p o l i c y ( C h a n d l e r and T r e b i l c o c k 1985 p.193). Canadian c i t i e s have demonstrated s u b s t a n t i a l r e s i l i e n c e i n 19 the f a c e of fundamental economic change (Hutton 1983 p.58). The r e c o v e r y and growth of Canadian c i t i e s s i n c e 1984 suggests t h a t f a c i l i t a t i n g adjustment t o s t r u c t u r a l economic change i s a more pra g m a t i c approach f o r urban economic p o l i c y than a t t e m p t i n g t o s t i m u l a t e l a r g e s c a l e economic r e s t r u c t u r i n g ( C i t y of Vancouver 1985c p . 3 ) . F a c i l i t a t i n g a djustment t o s t r u c t u r a l economic change r e q u i r e s a s y s t e m a t i c and thorough a n a l y s i s of the l o c a l economy and the i m p l e m e n t a t i o n of an economic growth s t r a t e g y i n v o l v i n g s e l e c t i v e s u p port f o r l o c a l i n d u s t r i e s and f i r m s (Dunn 1984). I d e n t i f y i n g p r o p u l s i v e i n d u s t r i e s i s an i n c r e a s i n g l y i m p o r t a n t element i n urban economic growth s t r a t e g i e s and i s an a c t i v i t y common t o the economic growth s t r a t e g i e s of Vancouver and Toronto as noted b r i e f l y below. 1. A major o b j e c t i v e of the economic s t r a t e g y implemented by the C i t y of Vancouver (1982) i s t o encourage a c t i v i t i e s which "have a ' c a t a l y t i c e f f e c t ' i n b u i l d i n g Vancouver's ( C i t y and Region) economy." T h i s s t r a t e g y i s based on the i d e n t i f i c a t i o n of 7 key' economic a c t i v i t i e s : H e a d q u a r t e r s / R e g i o n a l O f f i c e / S e n i o r Managment A c t i v i t i e s ; B u s i n e s s S e r v i c e s ; T r a n s p o r t a t i o n S e r v i c e s ; T o u r i s m / R e c r e a t i o n / C u l t u r a l A c t i v i t i e s ; S e l e c t i v e M a n u f a c t u r i n g ; The Knowledge I n d u s t r y ; and H e a l t h and S o c i a l S e r v i c e s . 2. A p r e l i m i n a r y d i s c u s s i o n of i n d u s t r i a l p o l i c y a l t e r n a t i v e s f o r the C i t y of Vancouver (I985bc) r e l i e s h e a v i l y on the i d e n t i f i c a t i o n of l o c a l p r o p u l s i v e i n d u s t r i e s . T h i s i n f o r m a t i o n i s used i n s e t t i n g p r i o r i t i e s f o r s u p p o r t i n g e x i s t i n g i n d u s t r i e s 20 and f o r c h o o s i n g the t y p e s of new i n d u s t r i e s the C i t y wants t o a t t r a c t . 3. An i m p o r t a n t component of the GVRD's p r o p o s a l s f o r an economic s t r a t e g y f o r m e t r o p o l i t a n Vancouver (1982 p.23) i s t o " i d e n t i f y key t a r g e t s e c t o r s t h a t w a r r a n t s u p p o r t and d etermine the t a s k s r e q u i r e d t o s u pport them." 4. T o r o n t o ' s economic development s t r a t e g y (1980 p.45) i s based on s e l e c t i v e s u p p o r t f o r key l o c a l s e c t o r s . Economic p o l i c y m a k e r s i n T o r o n t o a r e a c u t e l y aware of the l a c k of i n f o r m a t i o n of l o c a l i n d u s t r i e s and f i r m s and recommend m o n i t o r i n g the p r o p u l s i v e c h a r a c t e r i s t i c s of l o c a l i n d u s t r i e s t o warn the C i t y of s t r u c t u r a l and c y c l i c a l economic change (p.125). 5. B r i t t o n ' s (1981) p r o p o s a l s f o r an i n d u s t r i a l s t r a t e g y f o r T o ronto emphasize the importance of c o l l e c t i n g i n f o r m a t i o n on the l o c a l p r o d u c t i o n system. H i s r e s e a r c h p r i o r i t i e s (p.42) a r e a recommendation t o i d e n t i f y and m o n i t o r the p r o p u l s i v e c h a r a c t e r i s t i c s of T o r o n t o ' s i n d u s t r i e s . I d e n t i f y i n g p r o p u l s i v e i n d u s t r i e s i s a l s o an i m p o r t a n t element of n a t i o n a l economic and i n d u s t r i a l p o l i c y . The MacDonald R o y a l Commission's p r o p o s a l s f o r a new n a t i o n a l i n d u s t r i a l s t r a t e g y i n v o l v e s e l e c t i v e s u p p o r t f o r p r o p u l s i v e i n d u s t r i e s . I n d u s t r i a l p o l i c y r e q u i r e s adjustment mechanisms t h a t f a c i l i t a t e the t r a n s f e r of r e s o u r c e s from l o w - v a l u e d use t o h i g h - v a l u e d use. F l e x i b i l i t y and a d a p t a b i l i t y i n a r a p i d l y c h a n g i n g w o r l d s h o u l d be s e l f - e v i d e n t r e q u i s i t e s f o r Canada, as we depend h e a v i l y on i n t e r n a t i o n a l t r a d e . Commissioners urge t h a t adjustment p o l i c y become a c e n t r a l component of i n d u s t r i a l p o l i c y : d e c l i n i n g i n d u s t r i e s s h o u l d not be 21 shored up, but r a t h e r r a t i o n a l i z e d or phased out as c i r c u m s t a n c e s r e q u i r e ; a s s i s t a n c e s h o u l d be d i r e c t e d t o r e - e m p l o y i n g the r e s o u r c e s of d e c l i n i n g i n d u s t r i e s , e s p e c i a l l y l a b o u r r e s o u r s e s , i n more p r o d u c t i v e i n d u s t r i a l e n t e r p r i s e s (MacDonald R o y a l Commission 1985 v.2, p.263). Steed (1982 p.135) proposes a s i m i l a r i n d u s t r i a l s t r a t e g y f o r Canada which eases the d e c l i n e of weaker f i r m s i n s e c t o r s not c a p a b l e of w i t h s t a n d i n g i n t e r n a t i o n a l c o m p e t i t i o n ; and s u p p o r t i n g f i r m s i n s e c t o r s which are c u r r e n t l y or p o t e n t i a l l y c o m p e t i t i v e i n i n t e r n a t i o n a l markets (see a l s o Thurow 1981). S a v o i e (1986 p.153) recommends d r o p p i n g r e g i o n a l development p o l i c i e s i n which any f i r m i n any i n d u s t r y can q u a l i f y f o r support i n f a v o u r of p r o v i d i n g p u b l i c s u p p o r t f o r i n d u s t r i e s w i t h the b e s t chances f o r l o n g run s u c c e s s i n a r e g i o n . A c a p a c i t y s h o u l d be d e v e l o p e d e i t h e r i n s i d e t h e f e d e r a l government of t h r o u g h f e d e r a l - p r o v i n c i a l c o o r d i n a t i o n , t o i d e n t i f y investment . o p p o r t u n i t i e s t h r o u g h import s u b s t i t u t i o n and e x p o r t a n a l y s i s , i n d u s t r y p r o f i l e s , and c o r p o r a t e i n d u s t r i a l and economic i n t e l l i g e n c e ( S a v o i e 1986 p.159). 1.4 T h e s i s O u t l i n e Chapter 2 d i s c u s s e s e x i s t i n g c o n c e p t s on i n d u s t r y c h a r a c t e r i s t i c s which p r o p e l growth and change i n urban economies. The proposed d e s c r i p t i o n of the p r o p u l s i v e c h a r a c t e r i s t i c s of i n d u s t r i e s i s based on a c r i t i c a l r e v i e w of c o n c e p t s i n urban and r e g i o n a l economic r e s e a r c h , economic geography and i n d u s t r i a l / b u s i n e s s economics. I t i s an i n h e r e n t c h a r a c t e r i s t i c of p u b l i c p o l i c y i s s u e s t h a t they r a r e l y l i e w i t h i n the bounds of one or two academic or p r o f e s s i o n a l d i s c i p l i n e s . The . d i s c u s s i o n of p r o p u l s i v e c h a r a c t e r i s t i c s 22 involves a pragmatic synthesis of macro and micro-level concepts and insights on a broad, exploratory scale. Two kinds of industry c h a r a c t e r i s t i c s are addressed in chapter 2: propulsive mechanisms which d i r e c t l y influence l o c a l income and employment growth; and economic factors which cause propulsive mechanisms to change over the short to long run. In chapter 3 c r i t e r i a for i d e n t i f y i n g l o c a l propulsive industries are proposed with reference to the following industry c h a r a c t e r i s t i c s : -Industry Size -Growth Performance -Average Worker Earnings -Employment Earnings P r o f i l e s -Match of Occupational Demand with Local Unemployment -M u l t i p l i e r Performance -Innovation Intensity -Export Orientation - V u l n e r a b i l i t y to Import Penetration of Domestic Markets - S e n s i t i v i t y to the Business Cycle -Industry Concentration There are two essential requirements in formulating c r i t e r i a for i d e n t i f y i n g propulsive industries. The f i r s t requirement i s quantitative measures of the propulsive c h a r a c t e r i s t i c s of industries. The second requirement i s guidelines which specify the propulsive relationship between each industry c h a r a c t e r i s t i c and urban economic growth and change. This chapter examines the opportunities and l i m i t s in using available quantitative measures and guidelines to formulate c r i t e r i a for ide n t i f y i n g l o c a l propulsive industries. In chapter 4 available data are used to i d e n t i f y propulsive industries in metropolitan Vancouver, B.C. Available data has to meet two conditions in order to q u a l i f y for use in 23 i d e n t i f y i n g l o c a l p r o p u l i v e i n d u s t r i e s . F i r s t , the d a t a has t o measure i n d u s t r y c h a r a c t e r i s t i c s i n the Vancouver Census M e t r o p o l i t a n A r e a . Second, the d a t a has t o use a s t a n d a r d i z e d i n d u s t r i a l c l a s s i f i c a t i o n system i n o r d e r t o ensure c o m p a r a b i l i t y between d i f f e r e n t c r i t e r i a . The fundamental purpose of the c h a p t e r i s t o e x p l o r e the o p p o r t u n i t i e s and l i m i t s i n u s i n g e x i s t i n g d a t a t o i d e n t i f y p r o p u l s i v e i n d u s t r i e s i n a major Canadian m e t r o p o l i s r a t h e r than p r o v i d i n g a f u l l y d e t e r m i n a t e and comprehensive a n a l y s i s of p r o p u l s i v e i n d u s t r i e s i n Vancouver. Chapter 5 d i s c u s s e s t h e s i s f i n d i n g s on the o p p o r t u n i t i e s and l i m i t s - f o r i d e n t i f y i n g l o c a l p r o p u l s i v e i n d u s t r i e s and the i m p l i c a t i o n s of i d e n t i f y i n g p r o p u l s i v e i n d u s t r i e s f o r urban economic p o l i c y . T h i s c h a p t e r notes the s i g n i f i c a n t o p p o r t u n i t i e s f o r u s i n g c o n c e p t s and o b s e r v a t i o n s from urban, r e g i o n a l and i n d u s t r i a l r e s e a r c h t o f o r m u l a t e c r i t e r i a f o r i d e n t i f y i n g l o c a l p r o p u l s i v e i n d u s t r i e s ; and the s u b s t a n t i a l l i m i t a t i o n s of u s i n g a v a i l a b l e d a t a t o i d e n t i f y p r o p u l s i v e i n d u s t r i e s i n m e t r o p o l i t a n Vancouver, B.C. L o c a l economic p o l i c y m a k e r s most f r e q u e n t l y use growth performance t o i d e n t i f y p r o p u l s i v e i n d u s t r i e s and t h i s approach i s i n a d e q u a t e . A more comprehensive and a n a l y t i c a l approach f o r i d e n t i f y i n g l o c a l p r o p u l s i v e i n d u s t r i e s u s i n g the c r i t e r i a proposed i n c h a p t e r 3 i s recommended. I d e n t i f y i n g p r o p u l s i v e i n d u s t r i e s has i m p o r t a n t i m p l i c a t i o n s f o r urban economic p o l i c y . T h i s i n f o r m a t i o n can be used by l o c a l p o l i c y m a k e r s t o s e t p r i o r i t i e s among an 24 i n c r e a s i n g l y d i v e r s e and complex a r r a y of programs; evaluate the e f f i c a c y of implemented programs; and monitor and evaluate changes i n urban economic s t r u c t u r e . The importance of monitoring the p r o p u l s i v e c h a r a c t e r i s t i c s of l o c a l i n d u s t r i e s i n order to f a c i l i t a t e adjustment to f r e e trade with the U.S. i s b r i e f l y d i s c u s s e d . T h i s chapter a l s o recommends the i n c l u s i o n of s e r v i c e s i n an i d e n t i f i c a t i o n of l o c a l p r o p u l s i v e i n d u s t r i e s r a t h e r than an o v e r l y r e s t r i c t i v e focus on manufacturing. F i n a l l y , a stronger r o l e f o r m e t r o p o l i t a n governments in economic r e s e a r c h and p o l i c y i s suggested. 25 I I . AN EXPLORATION OF THE PROPULSIVE CHARACTERISTICS OF INDUSTRIES 2.1 I n t r o d u c t i o n Chapter 2 p r o v i d e s a c o n c e p t u a l f o u n d a t i o n f o r i d e n t i f y i n g p r o p u l s i v e i n d u s t r i e s by d e s c r i b i n g i n d u s t r y c h a r a c t e r i s t i c s which s t i m u l a t e growth and change i n urban economies. F r a n c o i s P e r r o u x ' s o r i g i n a l c o n c e p t u a l i z a t i o n of the " c h a r a c t e r i s t i c s of p r o p u l s i v e u n i t s and t h e i r growth i n d u c i n g mechanisms" (Gore 1984 p.86) s u g g e s t s t h a t t h e r e a r e two b a s i c k i n d s of c h a r a c t e r i s t i c s of p r o p u l s i v e i n d u s t r i e s . F i r s t , t h e r e a r e p r o p u l s i v e mechanisms - the c h a r a c t e r i s t i c s of i n d u s t r i e s which d i r e c t l y s t i m u l a t e income and employment growth and change i n urban economies. The second c a t e g o r y of c h a r a c t e r i s t i c s i n c l u d e s economic f a c t o r s which change p r o p u l s i v e mechanisms over the s h o r t t o l o n g r u n . Urban and r e g i o n a l economic r e s e a r c h has not produced a comprehensive l i s t of c h a r a c t e r i s t i c s which can be used t o i d e n t i f y and a n a l y z e p r o p u l s i v e i n d u s t r i e s . The c h a r a c t e r i s t i c s a d d r e s s e d i n t h i s c h a p t e r a r e common themes i n e x i s t i n g a n a l y s e s of p r o p u l s i v e i n d u s t r i e s (Sweet 1969; B a x t e r and D a v i s 1974; George 1983; C i t y of Vancouver 1985bc). E x i s t i n g t h e o r i e s of urban economic growth w h i l e i nadequate f o r e x p l a i n i n g and p r e d i c t i n g contemporary p a t t e r n s of urban economic change a r e an i m p o r t a n t s o u r c e of i n s i g h t s i n t o p r o p u l s i v e mechanisms. I n s i g h t s i n t o economic f a c t o r s which cause p r o p u l s i v e mechanisms t o change over time can be found i n growth p o l e t h e o r y ( P e r r o u x 26 1955; B o u d e v i l l e 1966; Lasuen 1972; K u k l i n s k i 1972); r e c e n t r e s e a r c h u s i n g a m u l t i - d i s c i p l i n a r y approach i n a n a l y z i n g urban economic growth and change (Markusen 1985; Ley and Hutton 1987); p r o d u c t c y c l e and r e l a t e d t h e o r i e s of i n d u s t r y development ( U t t e r b a c k and Abernathy 1975; R o t h w e l l and Z e g v e l d 1985); and t h e o r i e s of i n d u s t r i a l o r g a n i z a t i o n which a n a l y z e the r e l a t i o n s h i p s between i n d u s t r y s t r u c t u r e , conduct and performance (Sawyer 1985, Greer 1984, Howe 1978). The work of e a r l y growth p o l e t h e o r i s t s such as P e r r o u x ( 1 9 5 5 - t r a n s l a t e d 1981) and B o u d e v i l l e (1966) p r o v i d e s a s t a r t i n g p o i n t f o r d e s c r i b i n g p r o p u l s i v e mechanisms. P r o p u l s i v e i n d u s t r i e s a r e l a r g e , e x h i b i t s t r o n g growth and the a b i l i t y t o t r a n s m i t growth i m p u l s e s t o o t h e r i n d u s t r i e s t h r o u g h i n p u t and o u t p u t l i n k a g e s (Darwent 1975 p.554). The a n a l y s i s of i n p u t and output l i n k a g e s has been the p r i n c i p a l method f o r i d e n t i f y i n g and a n a l y z i n g p r o p u l s i v e i n d u s t r i e s ( B o u d e v i l l e 1966; E r i c k s o n 1974; Lever 1980). P o s t - i n d u s t r i a l t h e o r i e s of urban economic growth and change suggest t h a t i n a d d i t i o n t o i n d u s t r y s i z e , growth and the t r a n s m i s s i o n of growth i m p u l s e s t h r o u g h l i n k a g e s , i n d u s t r i e s s t r o n g l y i n f l u e n c e the d i s t r i b u t i o n of income and employment w i t h i n urban p o p u l a t i o n s ( B e l l 1974; Stanback 1979: D a v i s and Hutton 1981). Concepts and i s s u e s a d d r e s s i n g t h e s e p r o p u l s i v e mechanims a r e d e s c r i b e d i n s e c t i o n 2.2. Change i s a fundamental c h a r a c t e r i s t i c of a l l i n d u s t r i e s . I n f o r m a t i o n on i n d u s t r y s i z e , growth, and l i n k a g e s p r o v i d e s a s t a t i c d e s c r i p t i o n of p r o p u l s i v e i n d u s t r i e s . ... the e x c l u s i v e use of i n p u t - o u t p u t a n a l y s i s h as...unduly r e s t r i c t e d the concept of a l e a d i n g or 27 dominant s e c t o r t o l a r g e i n d u s t r i e s w i t h l a r g e m a t r i x m u l t i p l i e r e f f e c t s (Lasuen 1972 p.24). In o r d e r t o a n a l y z e the dynamic n a t u r e of p r o p u l s i v e i n d u s t r i e s i t i s n e c e s s a r y t o uncover f a c t o r s which cause p r o p u l s i v e mechanisms t o change over the s h o r t t o l o n g r u n . Four f a c t o r s -t e c h n o l o g i c a l i n n o v a t i o n , market o r i e n t a t i o n , s e n s i t i v i t y t o the b u s i n e s s c y c l e and o l i g o p o l y - p l a y c e n t r a l r o l e s i n c h a n g i n g p r o p u l s i v e mechanisms over time and are d i s c u s s e d i n s e c t i o n 2.3. T h i s c h a p t e r i s not a comprehensive s p e c i f i c a t i o n of i n d u s t r y c h a r a c t e r i s t i c s which p r o p e l urban economic growth and change. R a t h e r i t i s an attempt t o uncover and d e s c r i b e fundamental i n d u s t r y c h a r a c t e r i s t i c s which can be used t o make comparisons between i n d u s t r i e s and t o i d e n t i f y p r o p u l s i v e i n d u s t r i e s i n advanced m e t r o p o l i t a n economies. 2.2 The P r o p u l s i v e Mechanisms Of I n d u s t r i a l P r o d u c t i o n 2.2.1 The E f f e c t s Of I n d u s t r y S i z e And Growth On O v e r a l l Urban  Income And Employment A fundamental p r o p u l s i v e mechanism i n v o l v e s the i n f l u e n c e of i n d u s t r y s i z e and growth on the o v e r a l l l e v e l s of income and employment i n an urban economy. I n d u s t r i e s a r e not d i s t r i b u t e d s p a t i a l l y i n random f a s h i o n a c r o s s n a t i o n a l economies but e x h i b i t h i g h l y v a r i a b l e and clumped p a t t e r n s of l o c a t i o n a t the urban l e v e l . The s t r u c t u r e and growth of an urban economy are s t r o n g l y i n f l u e n c e d by the s i z e s and growth performances of the 28 unique mix of l o c a l i n d u s t r i e s (Hoover 1971 p.206; Stanback and N o y e l l e 1982 p.7; H a l l 1986 p.102). Thompson (1968 p.46) c h a l l e n g e s : Here we can b e g i n s i m p l i s t i c a l l y by c a s t i n g a l o c a l economy as a mere bundle of i n d u s t r i e s i n space: t e l l me your i n d u s t r i e s and I w i l l t e l l your (immediate) f o r t u n e . How c o u l d a h i g h l y s p e c i a l i z e d economy f a i l t o r e f l e c t i n i t s l e v e l , d i s t r i b u t i o n and s t a b i l i t y of income and growth r a t e s i t s d i s t i n c t i v e i n d u s t r y mix. In d i s c u s s i n g the b e n e f i t s of i n d u s t r i a l s p e c i a l i z a t i o n , N o r c l i f f e (1984 p.11) s t a t e s t h a t c o n c e n t r a t i o n s of growing i n d u s t r i e s l e a d t o l o c a l economic growth: ...a r e g i o n may a c h i e v e a h i g h l e v e l of growth by s p e c i a l i z i n g i n new i n d u s t r i e s p r o d u c i n g goods and s e r v i c e s w i t h a r a p i d l y expanding demand. Per r o u x (1981 p.182) obse r v e d t h a t p r o p u l s i v e i n d u s t r i e s have h i g h e r o u t p u t growth than the average o v e r a l l growth r a t e of i n d u s t r i a l o u tput or n a t i o n a l o u t p u t . The e x t e n t t o which growing i n d u s t r i e s o f f s e t l o s s e s due t o d e c l i n i n g i n d u s t r i e s i s a key d e t e r m i n a n t of growth i n an urban economy. E v i d e n c e of the c r i t i c a l r o l e of growing i n d u s t r i e s i n major urban economies i n the U.S. i s p r o v i d e d by B i r c h (1979, 1981). He s u g g e s t s t h a t t h e i n m i g r a t i o n and o u t m i g r a t i o n of f i r m s has n e g l i g i b l e e f f e c t s on t o t a l urban employment, and employment l o s s e s due t o f i r m c l o s u r e s and c o n t r a c t i o n s a r e r o u g h l y the same i n major U.S. c i t i e s . Most i m p o r t a n t l y , t h e key d i f f e r e n c e s between American c i t i e s i n employment growth between 1970 and 1976 was the growth r a t e s of e x i s t i n g f i r m s and i n d u s t r i e s and the r a t e of e s t a b l i s h m e n t of new ones. M e a s u r i n g growth performance i s an i m p o r t a n t element i n the 29 i d e n t i f i c a t i o n of p r o p u l s i v e i n d u s t r i e s . Over time the growth performance of a p a r t i c u l a r i n d u s t r y changes w i t h c o n c o m i t a n t e f f e c t s on urban economic growth and s t r u c t u r e . P e r r o u x (1981 p. 182) noted t h a t the growth of p r o p u l s i v e i n d u s t r i e s " a c c e l e r a t e d a t f i r s t d u r i n g a s e r i e s of p e r i o d s , a t t a i n s a l i m i t , p a s t which they e x p e r i e n c e a r e l a t i v e d e c r e a s e . " A s i m i l a r p a t t e r n of i n d u s t r y growth i s suggested by p r o d u c t c y c l e t h e o r y ( S t o r p e r 1985; R o t h w e l l and Z e g v e l d 1985 p.17; Markusen 1985 c h . 2 ) . Growth P o l e and Economic Base t h e o r i e s of urban economic development suggest t h a t m a n u f a c t u r i n g i s the p r i m a r y source of c u r r e n t employment and f u t u r e employment growth i n urban economies. Y e t , t h i s a s s e r t i o n does not c o i n c i d e w i t h r e c e n t e x p e r i e n c e s i n many urban economies which have a c q u i r e d a " p o s t -i n d u s t r i a l " economic base due t o t h e r e c e n t growth of s e r v i c e s and a c o n c o m i t a n t d e c l i n e i n m a n u f a c t u r i n g employment ( B e l l 1974; H i r s c h h o r n 1979; D a v i s and H u t t o n 1981; Stanback and N o y e l l e 1982). In a p o s t - i n d u s t r i a l urban economy, "employment growth may be dependent l a r g e l y on s e r v i c e a c t i v i t i e s r a t h e r than the e x t r a c t i v e and m a n u f a c t u r i n g s e c t o r s " ( D a v i s and Hutton 1981 p.15; see a l s o D a n i e l s 1983). 2.2.2 I n d u s t r y E f f e c t s On The D i s t r i b u t i o n Of Urban Income And  Employment I n d u s t r i e s i n f l u e n c e the d i s t r i b u t i o n of income and employment w i t h i n urban p o p u l a t i o n s i n a d d i t i o n t o i n f l u e n c i n g o v e r a l l income and employment l e v e l s and growth (Massey and 30 Meegan 1978 p.181; B i r c h and MacCraken 1984 p.64; F a l l o w s 1985). S h i f t s i n the d i s t r i b u t i o n of r e s o u r c e s , employment and pe o p l e a r e an i n t e g r a l p a r t of urban economic growth and change ( H i r s c h h o r n 1979 p.109). E m p i r i c a l r e s e a r c h on changes i n the s t r u c t u r e of urban economies (1960-1980) i s an i m p o r t a n t s o u r c e of i n s i g h t s i n t o the ways i n d u s t r i e s i n f l u e n c e the d i s t r i b u t i o n of employment and income ( B e l l 1974; Stanback 1979; D a v i s and Hutton 1981). The d i s t r i b u t i o n of income and employment w i t h i n urban p o p u l a t i o n s i s i n f l u e n c e d by the o c c u p a t i o n a l demands of l o c a l i n d u s t r i e s . " I n d u s t r i e s d i f f e r w i d e l y i n terms of o c c u p a t i o n a l c o m p o s i t i o n and the e a r n i n g s l e v e l s t h a t c h a r a c t e r i z e them" (Stanback e t a l . 1981 p.67.). The unique o c c u p a t i o n a l r e q u i r e m e n t s of each i n d u s t r y a f f e c t s income and employment d i s t r i b u t i o n t h r o u g h the growth of t w o - t i e r e d l a b o u r s t r u c t u r e s , s t r u c t u r a l unemployment and i n v o l u n t a r y p a r t - t i m e employment as noted b r i e f l y below. Some o c c u p a t i o n s a r e b e t t e r p a y i n g than o t h e r s . M a n a g e r i a l , p r o f e s s i o n a l and t e c h n i c a l workers a r e p a i d h i g h e r wages than s k i l l e d m a n u f a c t u r i n g workers who i n t u r n earn more than c l e r i c a l , s a l e s and s e r v i c e workers (Stanback 1979 p.48). In a d d i t i o n , the e a r n i n g of workers a r e a f f e c t e d by r e l a t i v e d i f f e r e n c e s between i n d u s t r i e s i n the e a r n i n g s of each o c c u p a t i o n . "Some i n d u s t r i e s pay r e l a t i v e l y w e l l a c r o s s o c c u p a t i o n s , o t h e r s r e l a t i v e l y p o o r l y " (Stanback et a l . 1981 p.70 ) . Each i n d u s t r y has a unique o c c u p a t i o n a l e a r n i n g s p r o f i l e . 31 In m a n u f a c t u r i n g and c o n s t r u c t i o n , employment i s c o n c e n t r a t e d i n average and above average wage o c c u p a t i o n s (Sassen-Koob 1984 p. 153). Consumer and r e t a i l s e r v i c e s c r e a t e employment p r e d o m i n a n t l y i n low wage o c c u p a t i o n s , w h i l e p u b l i c a d m i n i s t r a t i o n and d i s t r i b u t i v e s e r v i c e s c r e a t e employment m o s t l y i n h i g h wage o c c u p a t i o n s . Producer and n o n - p r o f i t s e r v i c e s c r e a t e employment i n both h i g h wage and low wage o c c u p a t i o n s ( N o y e l l e 1983b p.121; Stanback e t a l . 1981 p.70-71; Sassen-Koob 1984 p.153). Employment i n urban economies i s becoming i n c r e a s i n g l y c o n c e n t r a t e d i n h i g h s k i l l ( h i g h wage) and low s k i l l (low wage) j o b s (Stanback e t a l . 1981 p.87).. New employment i n m a n u f a c t u r i n g i s l a r g e l y based on low s k i l l (low wage) j o b s (Sassen-Koob 1984 p.157-163). Many i n d u s t r i e s , p a r t i c u l a r l y some i n the s e r v i c e s e c t o r e x h i b i t a tendency towards a two t i e r e d l a b o u r s t r u c t u r e ( H i r s c h h o r n , 1979 p.116; Stanback and N o y e l l e 1981 p.33; N o y e l l e 1983 p.121). A b r i e f d e s c r i p t i o n of each t i e r i s drawn from D a v i s and Hutton (1981). The f i r s t t i e r i s composed of workers employed i n h i g h wage and h i g h l y s k i l l e d o c c u p a t i o n s i n v o l v i n g t h e c o l l e c t i o n , a n a l y s i s and d i s s e m i n a t i o n of i n f o r m a t i o n . A d m i t t a n c e t o t i e r 1 o c c u p a t i o n s ( p r o f e s s i o n a l , a d m i n i s t r a t i v e , m a n a g e r i a l and t e c h n i c a l ) i s r e s t r i c t e d t o i n d i v i d u a l s w i t h s u b s t a n t i a l t r a i n i n g . T i e r 2 employment i s i n low wage o c c u p a t i o n s ( c l e r i c a l , s a l e s ) p e r f o r m i n g r o u t i n e and r e p e t i t i o u s work (Massey and Meegan 1978 p.6; Stanback and N o y e l l e 1982 p.140-142). Workers employed i n t i e r 2 o c c u p a t i o n s have l i m i t e d 32 opportunities for advancement into higher wage t i e r 1 occupations and face an uncertain future. Theirs are e s s e n t i a l l y dead-end jobs with very l i t t l e opportunity for occupational and earnings improvement. Long term s t a b i l i t y of employment in such occupations is contingent upon the a b i l i t y of employers to keep workers' earnings at low levels and on the ups and downs of the economic cycle. The lack of s k i l l necessary to hold down such positions makes layof f s easy during periods of downturns while competition among workers and the introduction of labour-saving technology represent a constant threat against demands for higher wages (Noyelle 1983b p.128-129). Many t i e r 2 occupations experienced l i t t l e or no growth during the 1970s and the demand for unskilled labour in urban economies is decreasing (Hirschhorn 1979 p.l16; Davis and Hutton 1981 p. 18). In spite of recent trends, employment in t i e r 2 occupations w i l l remain high in order to support the information processing a c t i v i t i e s of t i e r 1 workers. A s i g n i f i c a n t outcome of changes in industry occupational demand i s the growth of structural unemployment among manufacturing workers (Bluestone and Harrison 1982 ch.3). Structural unemployment i s a common d i s t r i b u t i v e effect of contemporary i n d u s t r i a l change in urban economies (Hirschhorn 1979 p.115) and represents a mismatch between the s k i l l s possessed by unemployed- labour and the s k i l l s required by growing industries (Lipsey et a l . 1982 p.802; Economic Council Canada 1984 p.69). Workers displaced by the decline of employment demand in manufacturing industries experience d i f f i c u l t i e s in obtaining work in the service sector. Manufacturing workers lack the necessary work s k i l l s and must cope with the high costs of 33 r e t r a i n i n g i n o r d e r t o g a i n needed s k i l l s . In a d d i t i o n , t h e . s o c i a l p r e s t i g e which m a n u f a c t u r i n g workers a s s o c i a t e w i t h h i g h s k i l l m a n u f a c t u r i n g j o b s and the lower pay a s s o c i a t e d w i t h s e r v i c e s e c t o r employment a r e i m p o r t a n t impediments i n the adjustment of s u r p l u s m a n u f a c t u r i n g l a b o u r ( D a v i s and Hu t t o n 1981; F a l l o w s 1985). ...the b u s i n e s s e s t h a t s t a r t e d up were l o c a t e d i n d i f f e r e n t p l a c e s and were i n d i f f e r e n t i n d u s t r i e s ( u s u a l l y s e r v i c e s r a t h e r than m a n u f a c t u r i n g ) ; they r e q u i r e d d i f f e r e n t j o b s k i l l s , p a i d lower wages, p r o v i d e d l e s s j o b s e c u r i t y , or s i m p l y would not h i r e the p e o p l e who had been l a i d o f f ( B l u e s t o n e and H a r r i s o n 1982 p.27). A t h i r d p r o c e s s t h rough which i n d u s t r i e s i n f l u e n c e the d i s t r i b u t i o n of urban employment and income i s the growth of p a r t - t i m e employment. Underemployment, of which the growth of p a r t - t i m e j o b s i s an i n d i c a t o r , i s an i m p o r t a n t outcome of r e c e n t changes i n the s t r u c t u r e of i n d u s t r i a l p r o d u c t i o n ( B l u e s t o n e and H a r r i s o n 1982 p.10; Massey and Meegan 1978 p . 6 ) . P a r t - t i m e employment, both v o l u n t a r y and i n v o l u n t a r y , has i n c r e a s e d s h a r p l y i n Canada (Akyeampong 1986 p.151) and i n B r i t i s h C olumbia. F o l l o w i n g the r e c e s s i o n , the p r o p o r t i o n of p a r t - t i m e j o b s had i n c r e a s e d t o 18.2 p e r c e n t of a l l j o b s . However, d u r i n g t h i s p e r i o d , the numbers of p a r t - t i m e workers who wanted f u l l - t i m e work i n c r e a s e d a t a much f a s t e r r a t e . By 1985, 52.2 p e r c e n t of a l l p a r t - t i m e work was h e l d i n v o l u n t a r i l y by members of the work f o r c e ( P r i n f i e l d , Kunin and Knauf 1987 p.13). There a r e numerous f a c t o r s i n f l u e n c i n g the growth of p a r t -time employment (Akyeampong 1986 p.148; Levesque 1987). I t i s a response by employers t o i n c r e a s e d c o m p e t i t i o n and i n c r e a s i n g demands f o r a more f l e x i b l e l a b o u r f o r c e ( P r i n f i e l d , Kunin and 34 Knauf 1987 p . 7 ) . The growth of p a r t - t i m e employment i s a l s o a r e f l e c t i o n of the e x p a n s i o n of the s e r v i c e s e c t o r which t r a d i t i o n a l l y employs more p a r t - t i m e l a b o u r than m a n u f a c t u r i n g . P a r t - t i m e employment has both p o s i t i v e and n e g a t i v e e f f e c t s on an urban economy. The growth of p a r t - t i m e employment a t the expense of f u l l - t i m e employment l o w e r s the l e v e l of d i s p o s a b l e income f o r i n d i v i d u a l s (Stanback 1979 p.48) w i t h c o n c o m i t a n t e f f e c t s on l o c a l consumer s p e n d i n g . I t i s not c l e a r whether p a r t - t i m e employment s h o u l d be viewed as a s t e p down from f u l l -time employment or a s t e p up from unemployment. In a one t o one c o m p a r i s o n , a p a r t - t i m e j o b p r o v i d e s l e s s income than a f u l l -time j o b . However, s u b s t a n t i a l growth i n the number of p a r t -time j o b s can make an i m p o r t a n t c o n t r i b u t i o n t o the l o c a l income and employment base. In c i t i e s and r e g i o n s w i t h d e p r e s s e d economies, p a r t - t i m e employment growth i s b e t t e r than no employment growth a t a l l . The e f f e c t s of o c c u p a t i o n a l demand on the d i s t r i b u t i o n of income and employment w i t h i n urban p o p u l a t i o n s has i m p o r t a n t i m p l i c a t i o n s f o r i d e n t i f y i n g p r o p u l s i v e i n d u s t r i e s . The employment o p p o r t u n i t i e s f o r l a r g e p r o p o r t i o n s of urban p o p u l a t i o n s are c h a n g i n g ( D a v i s and Hutton 1981 p.18). S k i l l e d , s e m i - s k i l l e d and u n s k i l l e d workers who l o s e t h e i r j o b s because of the d e c l i n e or r e s t r u c t u r i n g of l o c a l m a n u f a c t u r i n g i n d u s t r i e s e x p e r i e n c e s i g n i f i c a n t d i f f i c u l t i e s i n f i n d i n g new j o b s . I n d i v i d u a l s employed i n t i e r 2 o c c u p a t i o n s p e r f o r m i n g r o u t i n i z e d t a s k s have l i m i t e d o p p o r t u n i t i e s f o r advancement i n t o h i g h e r p a y i n g o c c u p a t i o n s . Workers i n v o l u n t a r i l y employed i n 35 p a r t - t i m e jobs earn s u b s t a n t i a l l y l e s s income than f u l l - t i m e workers. T h i s damages the e q u i t a b l e foundation upon which Canadian s o c i e t y i s based (Economic C o u n c i l of Canada 1987a p.14). The lack of l a r g e and s t a b l e consumer markets i s a l s o a handicap fo r producers of goods and s e r v i c e s . D i f f e r e n c e s between i n d u s t r i e s i n o c c u p a t i o n a l demand and the earnings generated by each occupation are t h e r e f o r e important i s s u e s i n the i d e n t i f i c a t i o n of p r o p u l s i v e i n d u s t r i e s . 2.2.3 T r a n s m i t t i n g Growth Impulses Through I n t e r - I n d u s t r y  Linkages A c r i t i c a l aspect of F r a n c o i s Perroux's o r i g i n a l c o n c e p t u a l i z a t i o n of a p r o p u l s i v e i n d u s t r y i n v o l v e s the a b i l i t y to t r a n s m i t growth impulses to a l o c a l economy through input and output l i n k a g e s with other i n d u s t r i e s (Perroux 1981 p.183). A p r o p u l s i v e i n d u s t r y has a h i g h degree of l i n k a g e with other i n d u s t r i e s and as a r e s u l t , s t i m u l a t e s changes i n o v e r a l l urban economic p r o d u c t i o n much l a r g e r than i t s own changes i n p r o d u c t i o n (Perroux 1981 p.184; Lever 1980 p.492; S c o t t 1983 p. 3) . B o u d e v i l l e (1966 p.112-113) provided a more a n a l y t i c a l d e s c r i p t i o n of the p r o p u l s i v e i n f l u e n c e s a r i s i n g from i n t e r -i n d u s t r y l i n k a g e s . He suggested that i n t e r - i n d u s t r y l i n k a g e s p r o p e l economic growth through input-output m u l t i p l i e r e f f e c t s and through p o l a r i z a t i o n e f f e c t s . More recent r e s e a r c h has c o n c e n t r a t e d the use of input-output m u l t i p l i e r s to analyze p r o p u l s i v e i n d u s t r i e s (Hermansen 1969 p.22-23; Thomas 1972 p.79; Lasuen 1972 p.24-25; Beyers 1972, 1973, 1974; E r i c k s o n 1974, 36 1975; S c o t t 1983 p.3-4). For example, Lever (1980 p.501) notes t h a t . . . p r o p u l s i v e i n d u s t r i e s have been i d e n t i f i e d as t h o s e which a r e s i g n i f i c a n t l y l i n k e d by f l o w s of goods w i t h a l a r g e number of o t h e r i n d u s t r i e s and which a r e t h e r e f o r e l i k e l y t o t r a n s m i t growth most w i d e l y . An i n p u t - o u t p u t m u l t i p l i e r e s t i m a t e s the t o t a l change i n urban economic a c t i v i t y which a r i s e s from a change i n the l e v e l of p r o d u c t i o n i n a p a r t i c u l a r i n d u s t r y . The p r o p u l s i v e e f f e c t s of i n t e r - i n d u s t r y l i n k a g e s on urban economic growth a r e dependent on the s t r e n g t h of t h r e e r e l a t e d a c t i v i t i e s : d i r e c t a c t i v i t y which a c c o u n t s f o r the t o t a l s a l e s and p u r c h a s e s of the p r o p u l s i v e i n d u s t r y ; i n d i r e c t a c t i v i t y which a c c o u n t s f o r changes i n s a l e s and p u r c h a s e s of i n d u s t r i e s which s e l l i n p u t s t o or purchase i n p u t s from the p r o p u l s i v e i n d u s t r y ; and induced a c t i v i t y which a c c o u n t s f o r i n c r e a s e s i n spending by i n d i v i d u a l s d i r e c t l y and i n d i r e c t l y employed ( D a v i s 1972, 1976 p.171; Beyers 1973 p.19; E r i c k s o n 1974 p.403). The r o l e of d i r e c t , i n d i r e c t and induced a c t i v i t i e s i n p r o p e l l i n g urban economic growth a r e d i s c u s s e d below. D i r e c t and i n d i r e c t a c t i v i t i e s a r e the p r o p u l s i v e e f f e c t s which o c c u r t h r o u g h f o r w a r d and backward l i n k a g e s between i n d u s t r i e s (Beyers 1972 p.18; E r i c k s o n 1974 p.403; D a v i s 1972 p.23). A backward l i n k a g e i s a demand f o r goods and s e r v i c e s from an i n p u t source and a f o r w a r d l i n k a g e i s the s u p p l y of goods and s e r v i c e s e i t h e r t o f u r t h e r p r o d u c t i o n or t o f i n a l consumption (Hoover 1971 p.215). The e x t e n t and s t r e n g t h of i n t e r - i n d u s t r y l i n k a g e s s t r o n g l y i n f l u e n c e s the p r o p u l s i v e 37 e f f e c t s of d i r e c t and i n d i r e c t a c t i v i t i e s : The magnitude of d i r e c t l y i n d uced economic growth i n b a c k w a r d - l i n k e d s u p p l y i n g f i r m s i s c o n d i t i o n e d by the net i n c r e a s e i n the demand f o r i n p u t s by the l e a d f i r m as d e t e r m i n e d by the ou t p u t l e v e l and the form of the p r o d u c t i o n f u n c t i o n of the l e a d f i r m . In t u r n , expanding b a c k w a r d - l i n k e d f i r m s have net i n c r e a s e s i n t h e i r demands f o r i n p u t s which may be a d d r e s s e d t o r e g i o n a l f i r m s , t h e r e b y g e n e r a t i n g i n d i r e c t economic growth ( E r i c k s o n 1974 p . 3 ) . A d d i t i o n a l i n s i g h t i n t o the p r o p u l s i v e i n f l u e n c e s of d i r e c t and i n d i r e c t a c t i v i t i e s i s p r o v i d e d by i n d u s t r i a l complex a n a l y s i s . An i n d u s t r i a l complex i s a s p a t i a l l y c o n c e n t r a t e d system of i n d u s t r i e s which a r e i n t e g r a t e d by s t r o n g f o r w a r d and backward l i n k a g e s (see I s a r d e t a l . 1959; Czamanski 1975; Czamanski and Czamanski 1977; Czamanski and A b l a s 1979; Latham 1976; N o r c l i f f e 1979 and S c o t t 1983 p.3-4). Four examples of i n d u s t r i a l complexes i n Vancouver a r e the s e a p o r t , the c l u s t e r of advanced b u s i n e s s s e r v i c e s i n the CBD (Hutton and Ley 1987), h e a l t h - c a r e i n s t i t u t i o n s and the l o c a l network of u n i v e r s i t i e s and r e s e a r c h i n s t i t u t e s . Induced a c t i v i t y a c c o u n t s f o r i n c r e a s e s i n l o c a l spending by i n d i v i d u a l s employed i n d i r e c t l y and i n d i r e c t l y l i n k e d i n d u s t r i e s ( E r i c k s o n 1974 p.404; Beyers 1973 p . 1 9 ) . D a v i s (1972 p.23) o b s e r v e s : I n c r e a s e d f i n a l and i n t e r m e d i a t e s a l e s w i t h i n the r e g i o n promote i n c r e a s e d employment and income. The i n c r e a s e i n p e r s o n a l income i n t u r n r e s u l t s i n expanded household consumption w i t h i n the r e g i o n and thus a f u r t h e r i n c r e a s e i n f i n a l demand s a l e s which i n i t i a t e s s u c e s s i v e rounds of i n c r e a s e d economic a c t i v i t y . W h i l e much of the a t t e n t i o n i n urban and r e g i o n a l economic t h e o r y and p o l i c y i s c o n c e n t r a t e d on the p r o p u l s i v e e f f e c t s of 38 d i r e c t and i n d i r e c t a c t i v i t y ( f o r example, S c o t t 1983 p . 3 ) , i n d u ced a c t i v i t y a r i s i n g from i n c r e a s e d consumption spending i s a s u b s t a n t i a l source of l o c a l o u t p u t and employment growth (Beyers 1973 p.20, 1974 p.212). In h i s o r i g i n a l f o r m u l a t i o n of p r o p u l s i v e i n d u s t r i e s , P e r r o u x d i d not r e s t r i c t the growth s t i m u l t i n g e f f e c t s of i n t e r -i n d u s t r y l i n k a g e s t o a l o c a l economy. He i n d i c a t e d t h a t the p r o p u l s i v e i n f l u e n c e s of i n d u s t r i a l p r o d u c t i o n can be t r a c e d t h roughout a n a t i o n a l economy (Thomas 1972 p.54). A c r i t i c a l a s sumption of most growth p o l e t h e o r i s t s i s t h a t p r o p u l s i v e i n d u s t r i e s w i l l always g e n e r a t e s i z e a b l e employment growth i n ' c l o s e p r o x i m i t y t o the l o c a t i o n s of t h e i r o p e r a t i o n s as a consequence of the c r e a t i o n of backward and f o r w a r d l i n k a g e s and employee income e x p e n d i t u r e s ( P r e d 1976 p.152). Urban economies e x h i b i t a s u b s t a n t i a l l e v e l of openness which i s d e t e r m i n e d by the e x t e n t t o which l o c a l i n d u s t r i e s have i n p u t and o utput l i n k a g e s w i t h the s u r r o u n d i n g r e g i o n , and o t h e r d o m e s t i c and i n t e r n a t i o n a l c i t i e s ( G o o d a l l 1972 p.233). E v i d e n c e of the open s t r u c t u r e of urban economies i s p r o v i d e d by: 1. K a r a s k a (1969) who o b s e r v e d l a r g e e x t e r n a l i n p u t and o u t p u t l i n k a g e s i n the P h i l a d e l p h i a economy. 2. G i l m o u r (1974 p.341) who d e t e r m i n e d t h a t more than two-t h i r d s of a l l purchases and s a l e s by i n d u s t r i e s i n M o n t r e a l a r e made o u t s i d e the c i t y . 3. E r i c k s o n (1974, 1975) and Beyers (1972, 1973, 1974) who o b s e r v e d s u b s t a n t i a l l e a k a g e s from the S e a t t l e a r e a economy i n 39 the p r o d u c t i o n of Boeing Co. due t o l a r g e e x t r a - r e g i o n a l f o r w a r d and backward l i n k a g e s . 4. Pred (1976, 1977) who demonstrated s u b s t a n t i a l i n t e r a c t i o n between major American and Canadian m e t r o p o l i t a n c e n t e r s i n terms of c o r p o r a t e c o n t r o l over employment. I n d u s t r i e s which a r e c o n t r o l l e d by m u l t i - n a t i o n a l c o r p o r a t i o n s e x h i b i t s u b s t a n t i a l l i n k a g e s between c i t i e s i n the consumption of i n p u t s and the s a l e of o u t p u t s . P r o d u c t i o n i n l o c a l branch p l a n t s o f t e n i n v o l v e s the purchase of raw m a t e r i a l s and s e m i - f i n i s h e d goods, the s a l e of o u t p u t s and the use of h i g h e r o r d e r o f f i c e f u n c t i o n s (management, m a r k e t i n g , f i n a n c e , l e g a l , r e s e a r c h and development) from o t h e r l o c a t i o n s . E x t e r n a l l i n k a g e s reduce the l o c a l p r o p u l s i v e e f f e c t s of growth and change i n i n d u s t r i a l p r o d u c t i o n . I t i s p o s s i b l e f o r the l o c a t i o n of a r a p i d l y growing f i r m of x i n i t i a l employees w i t h weak l i n k a g e s t o the r e s t of the r e g i o n a l economy t o have, over a p e r i o d of t i m e , a p p r o x i m a t e l y the same t o t a l employment impact upon the r e g i o n as t h a t of a more s l o w l y expanding l o c a t e e ( a l s o of x i n i t i a l employees) w i t h s t r o n g l i n k a g e s t o the r e s t of the economy ( B a x t e r and D a v i s 1974 p.42). The s t r e n g t h and d i v e r s i t y of l o c a l l i n k a g e s i s t h e r e f o r e an i m p o r t a n t c h a r a c t e r i s t i c of a p r o p u l s i v e i n d u s t r y . 40 2.3 Economic F a c t o r s Which Change P r o p u l s i v e Mechanisms Over  Time 2.3.1 T e c h n o l o g i c a l Innovation (a) D e f i n i n g T e c h n o l o g i c a l I n n o v a t i o n . To date, economic r e s e a r c h e r s have been unable to formulate an adequate d e f i n i t i o n of t e c h n o l o g i c a l i n n o v a t i o n . The most common approach i s to d e f i n e t e c h n o l o g i c a l i n n o v a t i o n as a process which leads to the development and use of new products, new p r o d u c t i o n processes and new forms of i n d u s t r y o r g a n i z a t i o n and management ( M a n s f i e l d 1968a; Steed 1982; Malecki 1984; Rothwell and Zegveld 1985). A c r i t i c a l c h a l l e n g e f o r re s e a r c h e r s i s to d e s c r i b e the nature as w e l l as the r e s u l t s of i n n o v a t i o n . What kinds of processes l e a d to the development and pr o d u c t i o n of new products and processes? An a l t e r n a t i v e approach to d e f i n i n g t e c h n o l o g i c a l i n n o v a t i o n i s suggested by Malecki (1984). He contends that i n n o v a t i o n i n v o l v e s the performance of "non-routine p r o d u c t i o n a c t i v i t i e s " (Malecki 1984 p.292). Non-routine p r o d u c t i o n a c t i v i t i e s i n c l u d e : fundamental and a p p l i e d r e s e a r c h , experimental development, design e n g i n e e r i n g , p r o d u c t i o n e n g i n e e r i n g and q u a l i t y c o n t r o l , t e c h n i c a l s e r v i c e s and support, a c q u i r i n g patents, a c q u i r i n g t e c h n i c a l and s c i e n t i f i c i n f o r m a t i o n , education and t r a i n i n g workers, and long-range f o r e c a s t i n g and product p l a n n i n g (Freeman 1982 p. 171). 41 I n n o v a t i o n i s not n e c e s s a r i l y a l i n e a r p r o c e s s l e a d i n g from r e s e a r c h and development t o m a r k e t i n g and s a l e s . I n n o v a t i o n o f t e n b e g i n s w i t h the r e c o g n i t i o n of market o p p o r t u n i t i e s which l e a d t o r e s e a r c h , development and p r o d u c t i o n ( S t e e d 1982 p.27). The s u p p l y of new t e c h n o l o g y t h r o u g h pure and a p p l i e d r e s e a r c h , and market demands f o r new p r o d u c t s a r e i n t e r - d e p e n d e n t c o n d i t i o n s which l e a d t o t e c h n o l o g i c a l i n n o v a t i o n ( R o t h w e l l and Z e g v e l d 1985 p.50). (b) T e c h n o l o g i c a l I n n o v a t i o n I n c r e a s e s I n d u s t r y Growth P r o s p e c t s . F r a n c o i s Perroux ( 1 9 5 5 - t r a n s l a t e d i n 1981) o b s e r v e d t h a t the u n d e r t a k i n g of t e c h n o l o g i c a l i n n o v a t i o n by i n d u s t r i e s i s an e s s e n t i a l f a c t o r i n e x p l a i n i n g observed p a t t e r n s of growth and change i n an economy over t i m e . E x i s t i n g c o n c e p t u a l and e m p i r i c a l e v i d e n c e s u g g e s t s a s t r o n g • p o s i t i v e r e l a t i o n s h i p between i n n o v a t i o n and i n d u s t r y growth as noted below. I n n o v a t i o n i s f r e q u e n t l y i d e n t i f i e d by. economic r e s e a r c h e r s as a v i t a l f a c t o r i n m a i n t a i n i n g the c o m p e t i t i v e a b i l i t i e s of i n d u s t r i e s i n changing markets. I n d u s t r i e s which g e n e r a t e new p r o d u c t and p r o d u c t i o n p r o c e s s i n n o v a t i o n s e x p e r i e n c e h i g h e r growth r a t e s than i n d u s t r i e s which do not ( B i r c h and MacCraken 1984). T e c n o l o g i c a l i n n o v a t i o n p r o v i d e s ...a c o m p e t i t i v e edge and i n c r e a s e d growth p r o s p e c t s f o r i n n o v a t i v e f i r m s and i n d u s t r i e s . In a d d i t i o n , the p r e s e nce of i n n o v a t i v e i n d u s t r i e s , or t h e i r component f i r m s or e s t a b l i s h m e n t s , i n a s u b n a t i o n a l r e g i o n , enhances the c o m p e t i t i v e p o s i t i o n and growth p r o s p e c t s of the r e g i o n (Thomas 1985 p . 2 5 ) . 42 P a t t e r n s of i n d u s t r y growth and change a r e s t r o n g l y i n f l u e n c e d by d i f f e r e n t k i n d s of i n n o v a t i o n . The e f f e c t s of a p r o d u c t or p r o d u c t i o n p r o c e s s i n n o v a t i o n on i n d u s t r y growth depends on whether the p r o d u c t or p r o c e s s i s e n t i r e l y new or a replacement of an e x i s t i n g one ( B i r c h and MacCraken 1984; de M e l t o et a l . 1980). Key c o n c e p t u a l and e m p i r i c a l i n s i g h t s which d e s c r i b e the c a u s a l r e l a t i o n s h i p s between i n n o v a t i o n and i n d u s t r y growth and change a r e d i s c u s s e d b r i e f l y below. P r o d u c t c y c l e t h e o r i e s of i n d u s t r y development suggest t h a t i n d u s t r y growth and change a r e f u n d a m e n t a l l y i n f l u e n c e d by c o m p e t i t i o n and t e c h n o l o g i c a l i n n o v a t i o n (Thomas 1975 p.17-22; U t t e r b a c k and Abernathy 1975; M a l e c k i 1981; S t e e d 1982 p.17-21; R o t h w e l l and Z e g v e l d 1985 p.17-21; Markusen 1985 p.22). I n d u s t r i e s a r e a t some l e v e l dependent on t e c h n o l o g i c a l i n n o v a t i o n i n o r d e r t o m a i n t a i n c o m p e t i t i v e s s and promote growth i n c h anging markets ( R o t h w e l l and Z egveld 1985 p.19; Freeman 1982 p.169-170; Thwaites and Oakey 1985 p.3; T h w a i tes 1983 p.37; M a l e c k i 1981 p.291; Steed 1982 p.42-43). W h i l e p r o d u c t c y c l e t h e o r y i s r e s t r i c t e d t o d e s c r i b i n g the b e h a v i o r of s i n g l e p r o d u c t - p r o d u c t i o n systems, i t r e p r e s e n t s a dominant paradigm of i n d u s t r i a l development ( S t o r p e r 1985; Markusen 1985). The p r o d u c t - p r o c e s s i n n o v a t i o n model of U t t e r b a c k and A bernathy (1975) has p r o v i d e d a n o t a b l e d e s c r i p t i o n of the r e l a t i o n s h i p between t e c h n o l o g i c a l i n n o v a t i o n and i n d u s t r y growth. New p r o d u c t development and i n t r o d u c t i o n i n v o l v e s f r e q u e n t , major p r o d u c t i n n o v a t i o n s as p r o d u c e r s i d e n t i f y and attempt t o accommodate user needs. P r o d u c e r s of s u c c e s s f u l 43 p r o d u c t s w i t h r a p i d l y expanding demand c o n t i n u e t o i n n o v a t e by d i v e r s i f y i n g p r o d u c t l i n e s and by d e v e l o p i n g l a r g e r s c a l e p r o d u c t i o n p r o c e s s e s ( U t t e r b a c k and Abernathy 1975 p.645; M a l e c k i 1981 p. 295). As p r o d u c t s r e a c h m a t u r i t y , c o m p e t i t i o n s h i f t s from p r o d u c t c h a r a c t e r i s t i c s t o p r i c e . P r o d u c t i o n p r o c e s s e s a r e r o u t i n i z e d and automated as p r o d u c e r s v i e f o r market s h a r e . In mature i n d u s t r i e s , p r o d u c t and p r o c e s s i n n o v a t i o n a r e reduced and i n c r e m e n t a l due t o the h i g h c o s t s of m o d i f y i n g p r o d u c t s or p r o c e s s e s i n l a r g e r o u t i n i z e d p r o d u c t i o n systems ( U t t e r b a c k and Abernathy 1975 p.642). E v e n t u a l l y , market demand d e c l i n e s due t o the growing s u c c e s s of p r o d u c t s u b s t i t u t e s ( R o t h w e l l and Z e g v e l d 1985 p.17; Markusen 1985 p.27; Thomas 1975 p.20; M a l e c k i 1981 p.292).. C o n t i n u e d i n d u s t r y growth i s dependent on the development of new p r o d u c t s w i t h expanding demand ( R o t h w e l l and Zeg v e l d 1985 p.19). Thomas (1975) uses p r o d u c t c y c l e t h e o r y t o e x p l a i n how i n n o v a t i o n i n f l u e n c e s the p r o p u l s i v e c a p a b i l i t i e s of l o c a l i n d u s t r i e s . Through i n t e r - i n d u s t r y l i n k a g e s , and the r e s u l t i n g d i r e c t , i n d i r e c t and in d u c e d l o c a l economic a c t i v i t i e s , i n d u s t r i e s p r o p e l a l o c a l economy th r o u g h a "round of growth" (Thomas 1975 p.7-8). A round of growth b e g i n s w i t h the i n t r o d u c t i o n of a new p r o d u c t i n t o a market and ends when pr o d u c t demand f a c e s l o n g run d e c l i n e due t o t h e growth of pr o d u c t s u b s t i t u t e s as suggested by p r o d u c t c y c l e t h e o r y (Thomas 1975 p.17-22). T e c h n o l o g i c a l i n n o v a t i o n i s a v i t a l f a c t o r i n i n i t i a t i n g and s u s t a i n i n g rounds of growth i n l o c a l economies t h r o u g h : 1. the c r e a t i o n of new p r o d u c t s w i t h r a p i d l y expanding 44 demand; and 2. the c r e a t i o n and use of p r o d u c t and p r o c e s s i n n o v a t i o n s which c o n t r i b u t e t o i n d u s t r y c o m p e t i t i v e n e s s t h r o u g h c o s t e f f i c i e n c i e s and i n c r e a s e s i n p r o d u c t i v i t y (Thomas 1975 p. 13-15). P r o d u c t and i n n o v a t i o n c y c l e t h e o r i e s p r o v i d e a s t a r t i n g p o i n t r a t h e r than a d e t e r m i n a t e a n a l y s i s of the c a u s a l r e l a t i o n s h i p s between t e c h n o l o g i c a l i n n o v a t i o n and i n d u s t r y growth and change. A c r i t i c a l i s s u e yet t o be r e s o l v e d c o n c e r n s the n o n - l i n e a r n a t u r e of the r e l a t i o n s h i p between i n n o v a t i o n and i n d u s t r y growth. Does more i n n o v a t i o n always l e a d t o more growth? Many e m p i r i c a l r e s e a r c h e r s a s s o c i a t e t e c h n o l o g i c a l i n n o v a t i o n w i t h m a n u f a c t u r i n g i n d u s t r i e s a c t i v e i n p r o d u c t r e s e a r c h and development. These i n d u s t r i e s e x p e r i e n c e s t r o n g c o m p e t i t i v e p r e s s u r e s and h i g h l e v e l s of u n c e r t a i n t y i n s u c c e s s f u l l y d e v e l o p i n g and p r o d u c i n g new p r o d u c t s / p r o c e s s e s (Thomas 1985 p.41; S t e e d 1982 p.41; M a n s f i e l d 1968b p.16). In s p i t e of h i g h l e v e l s of u n c e r t a i n t y , many i n d u s t r i e s a c t i v e l y i n v o l v e d i n r e s e a r c h and development have e x p e r i e n c e d s i g n i f i c a n t l y h i g h e r growth than l e s s i n n o v a t i v e i n d u s t r i e s . In C a l i f o r n i a , the b i o t e c h n o l o g y , computer s o f t w a r e , r o b o t i c s and p h o t o v o l t a i c s i n d u s t r i e s had an employment growth r a t e of 8% between 1972-1978 i n comparison t o 3% f o r a l l m a n u f a c t u r i n g i n d u s t r i e s (Markusen 1983 p.27). The e f f e c t s of r e s e a r c h and development i n t e n s i v e i n d u s t r i e s on urban economic growth a r e i n most c a s e s s m a l l because of h i g h l e v e l s of p r o d u c t and p r o c e s s replacement w i t h i n 45 i n d u s t r i e s and because th e s e i n d u s t r i e s r e p r e s e n t a s m a l l component of most urban economies ( B i r c h and MacCraken 1984 p. 2-3 ) . M a l e c k i (1984 p.263) c o n c l u d e s t h a t t e c h n o l o g y i n t e n s i v e i n d u s t r i e s r e p r e s e n t e d a p p r o x i m a t e l y 5% of t o t a l U.S. employment i n 1981 and su g g e s t s t h a t ... p r o d u c t s w i t h small-volume markets, e s p e c i a l l y new, i n n o v a t i v e p r o d u c t s and those t h a t c o n t i n u a l l y i n c o r p o r a t e t e c h n o l o g i c a l advances , a r e more l i k e l y t o be a b l e t o r e s i s t c o m p e t i t i o n . A l t h o u g h employment i n such s e c t o r s w i l l not be l a r g e , i t i s l i k e l y t o be a r e l a t i v e l y r e l i a b l e economic base both l o c a l l y and n a t i o n a l l y ( M a l e c k i 1984 p. 265). I n d u s t r i e s respond t o the c o m p e t i t i v e c h a l l e n g e s of chan g i n g markets by u n d e r t a k i n g a broad d i v e r s i t y of i n n o v a t i v e a c t i v i t e s (Freeman 1982 p.168-183). A s s o c i a t i n g i n n o v a t i o n e x c l u s i v e l y w i t h r e s e a r c h and development i n t e n s i v e m a n u f a c t u r i n g i n d u s t r i e s o m i t s the s u b s t a n t i a l p r o p u l s i v e i n f l u e n c e s of i n d u s t r i e s which use and adapt p r o d u c t and p r o c e s s t e c h n o l o g i e s c r e a t e d by o t h e r s . Not a l l h i g h - t e c h u s e r s p e r f o r m R & D ; nor do they n e c e s s a r i l y employ s c i e n t i s t s and e n g i n e e r s . Rather than d e v e l o p new t e c h n o l o g i e s t h e m s e l v e s , many u s e r s purchase h i g h - t e c h i n p u t s from o u t s i d e s o u r c e s (Economic C o u n c i l of Canada 1987b p . 9 ) . I n d u s t r i e s which use and adapt e x i s t i n g p r o d u c t and p r o c e s s t e c h n o l o g i e s make s u b s t a n t i a l c o n t r i b u t i o n s t o urban employment growth. In Canada, 38 out of 45 i n d u s t r i e s w i t h employment growth r a t e s " w e l l above the n a t i o n a l a verage" between 1971 and 1981 had h i g h or moderate l e v e l s of t e c h n o l o g y i n t e n s i v e i n p u t s (Economic C o u n c i l of Canada 1987b p.10-11). In the U.S., most of the employment growth between 1977-1981 was c r e a t e d by f i r m s making use of e x i s t i n g p r o d u c t / p r o c e s s t e c h n o l o g i e s ( B i r c h and 46 MacCraken 1984, G i l d e r 1987). Thwaites (1983) a n a l y z e d the e f f e c t s of new p r o d u c t i n n o v a t i o n s on employment growth i n the me t a l w o r k i n g machine t o o l s , s c i e n t i f i c and i n d u s t r i a l i n s t r u m e n t s , and r a d i o and e l e c t r o n i c components i n d u s t r i e s i n the U.K. The p r o d u c t i o n of new p r o d u c t s had i n g e n e r a l p o s i t i v e e f f e c t s on employment growth or a t l e a s t " s e c u r e d employment growth i n t o the f u t u r e " (Thwaites 1983 p.45). E m p i r i c a l r e s e a r c h on the e f f e c t s of new p r o d u c t s on i n d u s t r y growth has some i m p o r t a n t l i m i t a t i o n s . T h i s r e s e a r c h a n a l y s e s t h e r o l e of new p r o d u c t s i n the growth of s u c c e s s f u l i n d u s t r i e s and f i r m s . P r e d i c t i n g the e f f e c t s of a s p e c i f i c new pr o d u c t on i n d u s t r y or f i r m growth i s a f o r m i d a b l e c h a l l e n g e . A f u r t h e r r e s e a r c h i s s u e i s the e x t e n t t o which p r o d u c t i n n o v a t i o n s i n one i n d u s t r y s t i m u l a t e i n n o v a t i o n s i n o t h e r i n d u s t r i e s . P r o d u c t i n n o v a t i o n s o f t e n l e a d t o growth and p r o d u c t i v i t y i n c r e a s e s f o r i n d u s t r i e s o t h e r than the one d o i n g the o r i g i n a l r e s e a r c h and p r o d u c t development ( S c h e r e r 1984 p.57 ) . The e x t e n t of t r a n s f e r s of new p r o d u c t s and p r o c e s s e s between i n d u s t r i e s i n the U.S. i s e v i d e n t i n the r e l a t i o n s h i p s between m a n u f a c t u r i n g and nonmanufacturing i n d u s t r i e s . In 1974, h a l f of the 14 b i l l i o n d o l l a r s of R & D by m a n u f a c t u r i n g i n d u s t r i e s was " e x p o r t e d " t o nonmanufacturing i n d u s t r i e s ( S c h e r e r 1984 p.51). B i r c h and MacCraken (1984) contend t h a t much of the observ e d growth i n many i n d u s t r i e s i n the U.S. i s d i r e c t l y dependent on the a v a i l a b i l i t y of new p r o d u c t and p r o c e s s t e c h n o l o g y c r e a t e d by i n d u s t r i e s i n t e n s i v e l y i n v o l v e d i n r e s e a r c h and development. These i n d u s t r i e s form a v i t a l c o r e 47 upon which much of the i n n o v a t i o n and new i n d u s t r y and employment growth i n an economy a r e dependent. Can i n d u s t r i e s w i t h i n n o v a t i o n s e x h i b i t i n g a h i g h degree of use and. a d a p t a t i o n by o t h e r s e c t o r s be i d e n t i f i e d ? T e c h n o l o g i c a l i n n o v a t i o n l e a d s t o the replacement of many e x i s t i n g p r o d u c t s and p r o d u c t i o n p r o c e s s e s w i t h newer, more e f f i c i e n t ones. The c o n t i n u a l replacement of e x i s t i n g p r o d u c t s and p r o c e s s e s h e l p s i n d u s t r i e s t o m a i n t a i n c o m p e t i t i v e n e s s i n c h a n g i n g m a r k e t s , e s p e c i a l l y a t t h e i n t e r n a t i o n a l l e v e l ( B i r c h and MacCraken 1984 p.62). As t e c h n o l o g i c a l i n n o v a t i o n a l t e r s the s t r u c t u r e of i n d u s t r i a l p r o d u c t i o n , major s h i f t s o c c u r i n the mix of o c c u p a t i o n s w i t h i n i n d u s t r i e s (Economic C o u n c i l of Canada 1987a p.11). The r e t r a i n i n g of workers i s a s i g n i f i c a n t a s p e c t of t e c h n o l o g i c a l i n n o v a t i o n (Stanback 1979 p.106; D a v i s and Hutton 1985b; Economic C o u n c i l Canada 1987a p.15-16). Because of h i g h output growth, the use of computer-based t e c h n o l o g i e s by Canadian i n d u s t r i e s has l e a d i n most c a s e s (1971-1981) t o employee r e t r a i n i n g and t r a n s f e r s r a t h e r than d i s p l a c e m e n t (Economic C o u n c i l Canada 1987a p.10). The e x t e n t t o which the replacement of e x i s t i n g p r o d u c t i o n p r o c e s s e s w i t h new t e c h n o l o g y d i s r u p t s employment i n i n d u s t r i e s and communities depends i n p a r t on whether output growth exceeds p r o d u c t i v i t y g a i n s (Economic C o u n c i l Canada 1987b p.20). In m a n u f a c t u r i n g i n d u s t r i e s w i t h mature p r o d u c t markets, the replacement of e x i s t i n g p r o d u c t i o n p r o c e s s e s w i t h new t e c h n o l o g y has l e d t o s t r u c t u r a l unemployment f o r m a n u f a c t u r i n g w o r k e r s . In a d d i t i o n , the r e s t r u c t u r i n g of m a n u f a c t u r i n g p r o c e s s e s o f t e n 48 i n v o l v e s a g r e a t e r r o l e f o r t e c h n i c a l , p r o f e s s i o n a l and m a n a g e r i a l workers (Stanback 1979 p.100; H i r s c h h o r n 1979 p.111). In Canadian i n d u s t r i e s the d i s p l a c e m e n t of workers has a f f e c t e d s k i l l e d , s e m i - s k i l l e d and u n - s k i l l e d m a n u f a c t u r i n g o c c u p a t i o n s more than m a n a g e r i a l and p r o f e s s i o n a l ones (Economic C o u n c i l Canada 1987b p.17-19). In the U.S., the r a t i o n a l i z i n g and r e l o c a t i n g of b a s i c m a n u f a c t u r i n g i n d u s t r i e s has l e d t o s t r u c t u r a l unemployment f o r m a n u f a c t u r i n g workers i n c i t i e s such as New York, C h i c a g o and P i t t s b u r g h ( B l u e s t o n e and H a r r i s o n 1982 p t . 2 ) . In the U.K. the replacement of e x i s t i n g p r o d u c t i o n p r o c e s s e s w i t h new t e c h n o l o g y has g e n e r a l l y had " a d e t r i m e n t a l e f f e c t upon the l e v e l of employment i n an e s t a b l i s h m e n t " (Thwaites 1983 p.47). Another p a t t e r n of o c c u p a t i o n a l change a s s o c i a t e d w i t h replacement p r o c e s s i n n o v a t i o n s i s the growth of t w o - t i e r e d l a b o u r systems. There i s l i t t l e e v i d e n c e t o d a t e t h a t computer-based t e c h n o l o g i e s have c o n t r i b u t e d t o the development of h i g h c o n c e n t r a t i o n s of h i g h - s k i l l and l o w - s k i l l employment i n Canadian i n d u s t r i e s (Economic C o u n c i l of Canada 1987b). In Canada, h i g h s k i l l o c c u p a t i o n s e x p e r i e n c e d the h i g h e s t growth r a t e s and low s k i l l o c c u p a t i o n s the f a s t e s t d e c l i n e s between 1971 and 1981 (Economic C o u n c i l of Canada 1987a p.14). The sp r e a d of computer based t e c h n o l o g i e s i n Canadian i n d u s t r i e s i s a r e l a t i v e l y r e c e n t phenomenon. As t h i s t r e n d s i n c r e a s e s , the d i v i s i o n of workers i n t o e i t h e r h i g h s k i l l or low s k i l l j o b s may o c c u r . In t h e U.S., G i l d e r (1987) argues t h a t t w o - t h i r d s of employment growth s i n c e 1981 has been i n m a n a g e r i a l and 49 p r o f e s s i o n a l o c c u p a t i o n s r e l y i n g on the use of new t e c h n o l g i e s . However, t h e r e a re i n d i c a t i o n s of m i d d l e c l a s s d e c l i n e i n the U.S. due t o l a y - o f f s of m a n u f a c t u r i n g l a b o u r , and the growing number of low s k i l l , low wage j o b s i n many h i g h t e c h n o l o g y i n d u s t r i e s (Economic C o u n c i l Canada 1987a p.14). P r o d u c t and p r o c e s s i n n o v a t i o n h e l p s i n d u s t r i e s t o compete i n c h a n g i n g markets and i t r e q u i r e s s u b s t a n t i a l adjustment by workers t o changes i n p r o d u c t i o n a c t i v i t i e s . Most o f t e n the adjustment i n v o l v e s r e t r a i n i n g . But i n n o v a t i o n a l s o f o r c e s workers t o f i n d new o c c u p a t i o n s . In c i t i e s w i t h h i g h c o n c e n t r a t i o n s of b a s i c m a n u f a c t u r i n g i n d u s t r i e s , s t r u c t u r a l unemployment i s a s i g n i f i c a n t problem. W h i l e i n n o v a t i o n i s an imp o r t a n t f a c t o r i n c r e a t i n g s t r u c t u r a l unemployment, the f a i l u r e t o i n t r o d u c e new p r o d u c t s and p r o d u c t i o n ' p r o c e s s e s may l e a d t o even g r e a t e r employment l o s s e s as i n d u s t r y s a l e s a r e c h a l l e n g e d by the newer or l e s s e x p e n s i v e p r o d u c t s of domestic and f o r e i g n c o m p e t i t o r s (Economic C o u n c i l Canada 1984 p.45). T h waites (1983 p.51) obser v e d t h a t f i r m s which f a i l e d t o i n n o v a t e e x p e r i e n c e d h i g h e r employment l o s s e s than f i r m s which i n t r o d u c e d p r o d u c t and p r o d u c t i o n p r o c e s s i n n o v a t i o n s . The e f f e c t s of t e c h n o l o g i c a l i n n o v a t i o n on o c c u p a t i o n a l r e q u i r e m e n t s i s an i m p o r t a n t i s s u e and needs t o be i n t e g r a t e d i n t o our u n d e r s t a n d i n g of the r o l e of i n n o v a t i o n i n s t i m u l a t i n g i n d u s t r y growth and change. 50 2.3.2 Market O r i e n t a t i o n A market i s a g e o g r a p h i c a r e a i n which an i n d u s t r y s e l l s goods or s e r v i c e s . The market o r i e n t a t i o n of an i n d u s t r y i s d e t e r m i n e d by the s a l e of goods or s e r v i c e s i n domestic or i n t e r n a t i o n a l m a rkets. I n d u s t r y growth performance and growth p o t e n t i a l a r e d i r e c t l y i n f l u e n c e d by s a l e s i n e x p o r t m a r k e t s , and import s u b s t i t u t i o n and v u l n e r a b i l i t y t o import p e n e t r a t i o n i n domestic markets as d i s c u s s e d below. The l e v e l and c h a n g i n g n a t u r e of demand and c o m p e t i t i o n a r e key i s s u e s i n d e t e r m i n i n g and i n d u s t r y ' s a b i l i t y t o e n t e r , m a i n t a i n and expand s a l e s i n domestic and i n t e r n a t i o n a l m a rkets. Much of the r e s e a r c h on market o r i e n t a t i o n d e a l s w i t h the e f f e c t s of t r a d e on n a t i o n a l economies. T h i s r e s e a r c h has i m p o r t a n t i m p l i c a t i o n s f o r Canadian urban economies because m a n u f a c t u r i n g and s e r v i c e i n d u s t r i e s a r e c o n c e n t r a t e d i n major urban a r e a s . (a) The Importance of E x p o r t s t o the Growth of Canadian I n d u s t r i e s . Economic r e s e a r c h a t the n a t i o n a l l e v e l s u g g e s t s t h a t e x p o r t markets a r e a s i g n i f i c a n t growth s t i m u l u s f o r Canadian i n d u s t r i e s . B r i t t o n and G i l m o u r (1978 p.59) argue t h a t the f a i l u r e t o d e v e l o p i n d u s t r i e s e x p o r t i n g h i g h e r added-value and t e c h n o l o g y i n t e n s i v e p r o d u c t s i s a major weakness i n the Canadian economy. The Economic C o u n c i l of Canada (1983 p.97) suggest t h a t the slow r a t e of replacement of i n d u s t r i e s d i s a p p e a r i n g due t o c o m p e t i t i o n from i m p o r t s w i t h new e x p o r t 51 o r i e n t e d i n d u s t r i e s r e p r e s e n t s a s u b s t a n t i a l t h r e a t t o growth i n the Canadian economy. Background r e s e a r c h f o r the MacDonald R o y a l Commission on the Economic Union and Development P r o s p e c t s f o r Canada s u g g e s t s t h a t ...more than many o t h e r i n d u s t r i a l i z e d n a t i o n s , the h e a l t h of the Canadian economy i s d e t e r m i n e d by the a b i l i t y of Canadian p r o d u c e r s and m a n u f a c t u r e r s t o p e n e t r a t e f o r e i g n m a rkets: some 30 p e r c e n t of our p r o s p e r i t y i s drawn from e x p o r t s ( H a r t 1985 p.53). For Canadian i n d u s t r i e s , e x p o r t markets r e p r e s e n t a v i t a l s o u r c e of new demand and p o t e n t i a l growth ( L i p s e y e t a l . 1982; Steed 1982 p.96). High f i x e d c o s t s of p r o d u c t i o n i n many i n d u s t r i e s n e c e s s i t a t e s a l e s t o e x p o r t markets t o m a i n t a i n i n d u s t r y p r o f i t s and v i a b i l i t y (Watson 1984 p.206). Access t o e x p o r t markets p r o v i d e s l o c a l i n d u s t r i e s w i t h the chance t o d e v e l o p economies of s c a l e i n p r o d u c t i o n which a r e e s s e n t i a l i n m a i n t a i n i n g c o m p e t i t i v e n e s s i n the f a c e of i n c r e a s i n g market c o m p e t i t i o n ( L i p s e y and Smith 1985 p.32). The b e n e f i t s of e x p o r t markets f o r Canadian i n d u s t r i e s need t o be viewed w i t h i n a dynamic c o n t e x t . In e x p o r t markets, the demand f o r goods or s e r v i c e s may be growing, s t a b l e or d e c l i n i n g over t i m e . For i n d u s t r i e s which a r e dependent on e x p o r t s , changes i n demand d i r e c t l y i n f l u e n c e i n d u s t r y growth performance and growth p o t e n t i a l . The c h a n g i n g n a t u r e of i n t e r n a t i o n a l markets i s a l s o e v i d e n t i n the i n c r e a s i n g i n t e n s i t y of c o m p e t i t i o n . Recent t r e n d s which change the c o m p e t i t i v e c o n d i t i o n s of i n t e r n a t i o n a l (and d o m e s t i c ) markets i n c l u d e : 1. The i n c r e a s i n g pace of t e c h n o l o g i c a l i n n o v a t i o n . High l e v e l s of t e c h n o l o g i c a l i n n o v a t i o n a r e common a c r o s s a 52 broad range of i n d u s t r i e s . New p r o d u c t and p r o d u c t i o n p r o c e s s development causes s u b s t a n t i a l changes i n i n d u s t r y p r o d u c t i v i t y and c o m p e t i t i v e n e s s ( H a r r i s 1985 p.145; H a y t e r 1983 p.10). 2. The emergence and r a p i d growth of m a n u f a c t u r i n g i n d u s t r i e s i n newly i n d u s t r i a l i z e d c o u n t r i e s such as Korea, Taiwan and Singapore ( H a r r i s 1985 p.145; Hayter 1983 p.10). 3. The s t r o n g and i n c r e a s i n g i n f l u e n c e s of m u l t i - n a t i o n a l . c o r p o r a t i o n s i n i n t e r n a t i o n a l t r a d e (Hayter 1983 p.10; Vernon 1979). 4. Growing t r a d e p r o t e c t i o n i s m and government p o l i c i e s p r o m o t i n g i n d u s t r i a l development by many c o u n t r i e s i n response t o r e c e n t r e c e s s i o n s and d e c l i n e s i n i n d u s t r y growth ( H a r r i s 1985 p.145; H a y t e r 1983 p.10). N e o c l a s s i c a l t h e o r i e s of t r a d e suggest t h a t i n d u s t r i e s produce and e x p o r t p r o d u c t s f o r which t h e r e a r e l o c a l c o m p a r a t i v e advantages i n p r o d u c t i o n . P r o d u c t s w i t h r e l a t i v e l y h i g h e r p r o d u c t i o n c o s t s i n comparison t o o t h e r c o u n t r i e s a r e imported ( H a r r i s 1985 p.18). Comparative advantages i n c l u d e the l o c a l c o s t s of n a t u r a l r e s o u r c e s , l a b o u r and the advantages conveyed by i n n o v a t i o n and the development and p r o d u c t i o n of new t e c h n o l o g y based p r o d u c t s ( H a r r i s 1985 p.22; I n n i s 1979; Vernon 1966, 1979; Norton and Rees 1979; R o t h w e l l and Z e g v e l d 1985 p.22). Trade t h e o r i e s which a r e based on c o m p a r a t i v e c o s t advantages i n f a c t o r i n p u t s p r o v i d e a s t a t i c e x p l a n a t i o n of market o r i e n t a t i o n and cannot a d e q u a t e l y e x p l a i n r e c e n t t r e n d s 53 i n i n t e r n a t i o n a l t r a d e (D'Cruz and F l e c k 1985 p.34). Trade needs t o be viewed " w i t h i n the c o n t e x t of w o r l d market c o m p e t i t i o n and the s t r u c t u r a l v a r i a b l e s d e t e r m i n i n g c o m p e t i t i o n i n t hose markets" ( H a r r i s 1985 p.148). I n s i g h t s i n t o the causes of changes i n the c o m p e t i t i v e c o n d i t i o n s i n domestic and i n t e r n a t i o n a l markets can be g a i n e d by a n a l y z i n g b a r r i e r s t o t r a d e . Economic f a c t o r s which a f f e c t the a b i l i t y of f i r m s and i n d u s t r i e s t o e n t e r and expand e x p o r t markets i n c l u d e : s t a t i c and dynamic economies of s c a l e ; p r o d u c t d i f f e r e n t i a t i o n ; and a b s o l u t e c a p i t a l r e q u i r e m e n t s which c r e a t e c o m p e t i t i v e advantages t o f i r m s which a r e f i r s t t o s u c c e s s f u l l y e n t e r a market ( H a r r i s 1985 p.148; Ha y t e r 1983 p.10). Economies of s c a l e c o n v e y i n g c o s t advantages t o f i r m s which a r e f i r s t t o e s t a b l i s h i n a new market can r e p r e s e n t a s u b s t a n t i a l b a r r i e r t o the e n t r y of o t h e r f i r m s . S t a t i c economies of s c a l e i n c l u d e s p e c i a l i z i n g i n the p r o d u c t i o n of a l i m i t e d number of p r o d u c t s or p r o d u c t l i n e s ; l a r g e r p r o d u c t i o n runs and i n c r e a s e d p l a n t s i z e s making use of s t a n d a r d i z e d i n p u t s and p r o d u c t i o n p r o c e s s e s ; and i n c r e a s e d r a t e s of new p r o d u c t / p r o c e s s development and m a r k e t i n g ( L i p s e y and Smith 1985 p .32). Dynamic economies of s c a l e i n c l u d e p r e - e m p t i v e investment i n new p r o d u c t i o n f a c i l i t i e s and o p p o r t u n i t e s f o r i n c r e a s e d p r o d u c t i v i t y t h r o u g h a c c e l e r a t e d " l e a r n i n g by d o i n g " a s s o c i a t e d w i t h l a r g e r s c a l e p r o d u c t i o n systems ( H a r r i s 1985 p.87-88). The c o s t s and even the a v a i l a b i l i t y of c a p i t a l a r e o f t e n a s u b s t a n t i a l b a r r i e r t o i n d u s t r y e x p a n s i o n i n t o e x p o r t m a r k e t s . 54 The r i s k s a s s o c i a t e d w i t h new market development a r e a major f a c t o r i n the i n c r e a s e d c o s t of o b t a i n i n g c a p i t a l . F u r t h e r , the f i x e d c o s t s a s s o c i a t e d w i t h e n t e r i n g an e x p o r t market put s m a l l e r f i r m s from s m a l l open economies such as Canada a t a d i s t i n c t c o m p e t i t i v e d i s a d v a n t a g e ( H a r r i s 1985 p.149). The dynamic and h i g h l y c o m p e t i t i v e n a t u r e of i n t e r n a t i o n a l markets has i m p o r t a n t i m p l i c a t i o n s f o r i d e n t i f y i n g and a n a l y z i n g p r o p u l s i v e i n d u s t r i e s . Canadian i n d u s t r i e s f a c e s i g n i f i c a n t c h a l l e n g e s i n e n t e r i n g e x p o r t markets and i n m a i n t a i n i n g or i n c r e a s i n g e x p o r t s a l e s . An i n d u s t r y ' s a b i l i t y t o m a i n t a i n or i n c r e a s e e x p o r t s a l e s i s an i n d i c a t o r of c o m p e t i t i v e h e a l t h and i n d u s t r y growth p o t e n t i a l . The s a l e of goods or s e r v i c e s i n e x p o r t markets a l s o i n f l u e n c e s the ways i n d u s t r i e s t r a n s m i t growth impulses t o o t h e r l o c a l i n d u s t r i e s t h r o u g h l i n k a g e s . I n c r e a s e s i n demand f o r goods and s e r v i c e s due t o i n d u s t r y e n t r y or e x p a n s i o n of e x p o r t markets c r e a t e s l o c a l d i r e c t , i n d i r e c t and i n d uced growth e f f e c t s (Jacobs 1969 p.252-261). L o c a l f o r w a r d l i n k a g e s i n i n d u s t r i e s w i t h a s t r o n g e x p o r t o r i e n t a t i o n a r e f r e q u e n t l y t r u n c a t e d ( P r e d 1976, 1977; E r i c k s o n 1974; Beyers 1973, 1974). An i n d u s t r y ' s a b i l i t y t o t r a n s m i t growth i m p u l s e s t o the l o c a l economy ar e then dependent on the s t r e n g t h and d i v e r s i t y of l o c a l backward l i n k a g e s and the s t r e n g t h of l o c a l i n d u ced growth. 55 (b) Import S u b s t i t u t i o n and V u l n e r a b i l i t y t o Import P e n e t r a t i o n I n f l u e n c e I n d u s t r y Growth P r o s p e c t s i n Domestic M a r k e t s . The r e c e n t i n c r e a s e i n the number of c o u n t r i e s w i t h e x p o r t o r i e n t e d i n d u s t r i e s has i m p o r t a n t i m p l i c a t i o n s f o r the growth p r o s p e c t s of l o c a l i n d u s t r i e s s e l l i n g goods or s e r v i c e s i n domestic markets. In domestic markets, i n d u s t r y growth i s s t r o n g l y i n f l u e n c e d by import s u b s t i t u t i o n and v u l n e r a b i l i t y t o import p e n e t r a t i o n . On a c o n c e p t u a l l e v e l , s u b s t i t u t i n g l o c a l l y produced goods f o r i m p o r t s i n c r e a s e s i n d u s t r y growth and l o c a l economic growth s t i m u l a t e d by i n t e r - i n d u s t r y l i n k a g e s . I t f o l l o w s t h a t i f a r e g i o n can d e v e l o p l o c a l p r o d u c t i o n t o meet a demand p r e v i o u s l y s a t i s f i e d by i m p o r t s , t h i s import s u b s t i t u t i o n w i l l have p r e c i s e l y the same impact upon the r e g i o n a l economy as an e q u i v a l e n t i n c r e a s e i n e x p o r t s . In e i t h e r c a s e , t h e r e i s an i n c r e a s e i n s a l e s by p r o d u c e r s w i t h i n the r e g i o n (Hoover 1971 p.232). In C i t i e s and the Wealth of N a t i o n s Jane Jacobs (1984 p.39) argues t h a t import s u b s t i t u t i o n p r o v i d e s s i g n i f i c a n t growth o p p o r t u n i t i e s f o r l o c a l i n d u s t r i e s . Her arguments a r e u n p e r s u a s i v e because the e v i d e n c e p r e s e n t e d i s based on o b s e r v a t i o n s of the growth of urban economies i n the U.S., the U.K., Europe and Japan. By compa r i s o n , Canadian markets a r e r e l a t i v e l y s m a l l and t h e r e f o r e import s u b s t i t u t i o n p r o v i d e s weaker o p p o r t u n i t i e s f o r i n d u s t r y growth. The growth of Canadian i n d u s t r i e s i s a l s o d e t e r m i n e d by the degree of v u l n e r a b i l i t y t o import p e n e t r a t i o n of domestic m a r k e t s . S u b s t a n t i a l a t t e n t i o n i s f o c u s e d by economic p o l i c y 56 r e s e a r c h e r s on the e x t e n t and causes of Canadian d e i n d u s t r i a l i z a t i o n . A key i s s u e i s the response of Canadian i n d u s t r i e s t o changes i n t e c h n o l o g y ( f o r example, m i c r o p r o c e s s o r s ) and i n c r e a s i n g i n t e r n a t i o n a l c o m p e t i t i o n i n m a n u f a c t u r i n g markets e s p e c i a l l y from the newly i n d u s t r i a l i z e d c o u n t r i e s i n A s i a ( M c F e t r i d g e 1985 p.17-18). Recent t r e n d s i n the growth of i m p o r t s s u g gests t h a t Canadian i n d u s t r i e s are becoming i n c r e a s i n g l y v u l n e r a b l e t o import p e n e t r a t i o n . Large i n c r e a s e s i n i m p o r t s a r e l i k e l y t o r e s u l t i n the d e c l i n e of Canadian i n d u s t r i e s (Economic C o u n c i l of Canada 1983 p.113) w i t h c o n c o m i t a n t e f f e c t s on income and employment i n urban economies. E v i d e n c e of the impacts of growing i m p o r t s a r e mixed. B r i t t o n and G i l m o u r (1978 p.45-49) argue t h a t import p e n e t r a t i o n of domestic markets has o c c u r r e d on a l a r g e s c a l e and has l e d t o d e c l i n e s i n domestic m a n u f a c t u r i n g i n d u s t r i e s . In c o n t r a s t , the Economic C o u n c i l of Canada (1983a p.113-114) sug g e s t s t h a t o b s e r v e d i n c r e a s e s i n i m p o r t s and e x p o r t s i n the Canadian economy a r e c h a r a c t e r i s t i c of contemporary growth and change i n many i n d u s t r i a l i z e d economies and t h a t t h e r e i s l i t t l e e v i d e n c e of i n d u s t r i a l d e c l i n e i n Canada. In s p i t e of the i n c o n c l u s i v e n e s s of the e v i d e n c e t o d a t e , the o p p o r t u n i t i e s f o r import p e n e t r a t i o n of domestic markets a r e i n c r e a s i n g due t o the c o n t i n u i n g d e c l i n e i n m u l t i - l a t e r a l t r a d e b a r r i e r s ; the p o t e n t i a l f o r f r e e t r a d e w i t h the U.S.; and c o n t i n u i n g growth of i m p o r t s i n t o the Canadian economy (Economic C o u n c i l of Canada, 1983a p.107). V u l n e r a b i l i t y t o import p e n e t r a t i o n of domestic markets i s t h e r e f o r e i m p o r t a n t i n d i c a t o r 57 of changes i n an i n d u s t r y ' s p r o p u l s i v e c a p a b i l i t i e s . Changes i n domestic market share p r o v i d e e v i d e n c e of the c o m p e t i t i v e a b i l i t i e s of l o c a l i n d u s t r i e s and growth p r o s p e c t s i n domestic m a r k e t s . 2.3.3 S e n s i t i v i t y To The B u s i n e s s C y c l e I n d u s t r y growth and change i s s i g n i f i c a n t l y i n f l u e n c e d by macro-economic f o r c e s and t r e n d s (such as i n f l a t i o n , i n t e r e s t r a t e s , monetary and f i s c a l p o l i c y , and changes i n n a t i o n a l income). One f a c t o r w i t h s u b s t a n t i a l e f f e c t s on i n d u s t r y growth over the s h o r t t o medium run i s s e n s i t i v i t y t o the b u s i n e s s c y c l e . A key c h a r a c t e r i s t i c of a l l n a t i o n a l economies i s c y c l i c a l change i n g r o s s n a t i o n a l p r o d u c t brought about by changes i n aggre g a t e demand and s u p p l y f o r goods and s e r v i c e s . T h i s p a t t e r n of change, r e f e r r e d t o as the b u s i n e s s c y c l e , i s n e i t h e r smooth nor r e g u l a r over time i n i n t e n s i t y or d u r a t i o n ( L i p s e y e t a l . 1982 p.643). Two key c h a r a c t e r i s t i c s of the b u s i n e s s c y c l e a r e p e r i o d s of e x p a n s i o n c h a r a c t e r i z e d by growth i n demand and s u p p l y f o r p r o d u c t s , and r e c e s s i o n c h a r a c t e r i z e d by d e c l i n e i n ag g r e g a t e demand and s u p p l y . E v i d e n c e of the f r e q u e n c i e s and i n t e n s i t i e s of Canadian r e c e s s i o n s and e x p a n s i o n s are p r o v i d e d i n T a b l e s 1 and 2. S u b s t a n t i a l d i f f e r e n c e s i n the p e r c e n t a g e change i n GNE, e x p o r t s , employment and d i s p o s a b l e income c l e a r l y d i s t i n g u i s h p e r i o d s of economic r e c e s s i o n and e x p a n s i o n . W h i l e the r e c o v e r i e s of 1954-1980 were g e n e r a l l y dominated by the growing s t r e n g t h of consumer s p e n d i n g , the 1983 r e c o v e r y was l e d t o a 58 l a r g e degree by e x p a n s i o n i n i n d u s t r i a l o u t p u t t o i n c r e a s e p r o d u c t i n v e n t o r i e s (Dept. F i n . 1984 p.11). T a b l e 1 - C y c l i c a l Economic E x p a n s i o n s i n Canada 1953-1983. s o u r c e : Dept. F i n . 1984 p.9 P e r i o d s of 1954 1958 1961 1975 1980 1983 Economic E x p a n s i o n ( C u m u l a t i v e p e r c e n t a g e change) R e a l GNE 9.4 4.7 9.8 6.0 5.1 6.6 E x p o r t s 8.3 1 .5 3.9 6.2 8.9 21.8 Employment 2.3 0.1 3.5 3.2 3.7 3.5 R e a l P e r s o n a l 8.4 4.0 9.7 4.9 4.2 0.9 D i s p o s a b l e Income Macro-economic c y c l e s of e x p a n s i o n and r e c e s s i o n a r e e x p e r i e n c e d t o v a r y i n g degrees by a l l urban economies: The marked c y c l i c a l i n s t a b i l i t y of l o c a l economies d u r i n g the 1970s i s p r i m a r i l y a r e f l e c t i o n of the depth and frequency of n a t i o n a l b u s i n e s s c y c l e s d u r i n g t h i s p e r i o d (Bergman and G o l d s t e i n 1983 p.266). Trends i n urban economic growth and change a r e l i n k e d t o macro-economic c y c l e s t h r o u g h changes i n the p r o d u c t i o n of l o c a l i n d u s t r i e s . Changes i n a g g r e g a t e demand f o r and s u p p l y of goods and s e r v i c e s which c h a r a c t e r i z e p e r i o d s of e x p a n s i o n and r e c e s s i o n s i g n i f i c a n t l y i n f l u e n c e i n d u s t r y p r o d u c t i o n l e v e l s and employment ( L i p s e y e t a l . 1982 p.626). The degree of s e n s i t i v i t y of d i f f e r e n t i n d u s t r i e s t o changes i n the b u s i n e s s c y c l e s t r o n g l y i n f l u e n c e s changes i n the l e v e l s of income and 59 employment i n urban economies over the s h o r t t o medium r u n . T a b l e 2 - C y c l i c a l Economic R e c e s s i o n s i n Canada 1953-1983. s o u r c e : Dept. F i n . 1984.p.10 P e r i o d s of Economic R e c e s s i o n 1953 1 957 1 960 1974 1980 1981 ( C u m u l a t i v e P e r c e n t a g e Change) R e a l GNE -2.6 -0.3 -1.1 -0.4 -0.5 -6.5 E x p o r t s -8.0 -0.3 0.0 -8.4 -0.8 -9.1 Employment -0.5 1 .2 0.5 1 .5 0.6 -4.9 R e a l P e r s o n a l -0.9 3.4 -1 .0 4.7 1 .2 -1 .3 D i s p o s a b l e Income E m p i r i c a l s t u d i e s of the r e l a t i o n s h i p s between l o c a l i n d u s t r y mix and the l o c a l i n t e n s i t y of c y c l i c a l economic change suggest t h a t i n d u s t r i e s d i f f e r i n the degree of s e n s i t i v i t y t o the b u s i n e s s c y c l e . I t i s not the d i v e r s i t y of i n d u s t r i e s i n an urban or r e g i o n a l economy which makes i t more or l e s s v u l n e r a b l e t o c y c l i c a l economic change, but r a t h e r the l o c a l c o n c e n t r a t i o n of i n d u s t r i e s which a r e p a r t i c u l a r l y s e n s i t i v e t o changes i n the b u s i n e s s c y c l e (Hoover 1971 p.266). In an e x a m i n a t i o n of r e g i o n a l i n d u s t r y mix and b u s i n e s s c y c l e s i n the U.S., Browne (1978 p.35) n o t e s : Some i n d u s t r i e s such as d u r a b l e goods m a n u f a c t u r i n g , a r e c o n s i s t e n t l y more c y c l i c a l than o t h e r s ; so t h a t r e g i o n s s p e c i a l i z i n g i n t h e s e i n d u s t r i e s w i l l be more v u l n e r a b l e t o n a t i o n a l b u s i n e s s c y c l e s than a r e a s where they a r e l e s s i m p o r t a n t . (see a l s o N o r c l i f f e 1983 p.10; Syron 1978 p.31; Bergman and 60 G o l d s t e i n 1983 p.266) The economic f a c t o r s which make d i f f e r e n t i n d u s t r i e s more or l e s s s e n s i t i v e t o the b u s i n e s s c y c l e a re complex and dynamic. One f a c t o r i n f l u e n c i n g the degree of i n d u s t r y s e n s i t i v i t y t o the b u s i n e s s c y c l e i s income e l a s t i c i t y of demand which i s d e f i n e d as the r e s p o n s i v e n e s s of aggregate consumer demand f o r a p r o d u c t t o changes i n income l e v e l s (Bannock e t a l . 1984 p.212). The key v a r i a b l e i s the income e l a s t i c i t y of demand f o r the p r o d u c t s and s e r v i c e s of an i n d u s t r y . A town t h a t has s p e c i a l i z e d i n an i n d u s t r y w i t h h i g h demand e l a s t i c i t i e s w i l l d i s p l a y a c l a s s i c boom and bust c y c l e . But a town t h a t has s p e c i a l i z e d i n an a c t i v i t y w i t h i n e l a s t i c demand w i l l show m i n i m a l change between the upswing and the downswing phases of the c y c l e ( N o r c l i f f e 1983 p . 9 ) . D i f f e r e n t p r o d u c t s have d i f f e r e n t income e l a s t i c i t i e s of demand ( L i p s e y e t a l . 1982 p.92). Income e l a s t i c i t y of demand i s measured u s i n g the r a t i o of p e r c e n t a g e change i n the q u a n t i t y of a p r o d u c t demanded t o the p e r c e n t a g e change i n consumer income ( L i p s e y e t a l . 1982 p.93). "The concept of income e l a s t i c i t y of demand can be a p p l i e d t o an e n t i r e market as w e l l as t o a s i n g l e customer" ( M a n s f i e l d 1979 p.117). In t h i s case the q u a n t i t y becomes the t o t a l q u a n t i t y demanded i n the market and consumer income becomes the aggregate money income of a l l consumers i n the market. There a r e t h r e e broad c a t e g o r i e s of income e l a s t i c i t i e s of demand. I n d u s t r i e s which a r e r e l a t i v e l y more v u l n e r a b l e t o c y c l e s of economic r e c e s s i o n and e x p a n s i o n have an income e l a s t i c i t y of demand g r e a t e r than one. A one p e r c e n t change income r e s u l t s i n a g r e a t e r than one p e r c e n t change i n demand. I n d u s t r i e s which a r e r e l a t i v e l y l e s s v u l n e r a b l e t o r e c e s s i o n and 61 e x p a n s i o n have an income e l a s t i c i t y of l e s s than one. A one p e r c e n t change i n income l e a d s t o a l e s s than one p e r c e n t change i n demand. For some p r o d u c t s c a l l e d i n f e r i o r goods, i n c r e a s e s i n income l e a d t o d e c r e a s e s i n demand. T h i s phenomena w i l l be i g n o r e d s i n c e the m a j o r i t y of p r o d u c t s a r e c h a r a c t e r i z e d by p o s i t i v e income e l a s t i c i t i e s of demand ( L i p s e y e t a l . 1982 p.92). I n d u s t r y v u l n e r a b i l i t y t o c y c l i c a l economic change i s a l s o i n f l u e n c e d by changes i n s u p p l y and demand i n v o l v i n g f o r w a r d and backward l i n k e d i n d u s t r i e s . For example, Canadian n a t u r a l r e s o u r c e - b a s e d i n d u s t r i e s e x h i b i t s t r o n g c y c l i c a l changes i n output and employment because consumers of t h e i r p r o d u c t s i n domestic and e x p o r t markets a r e themselves v u l n e r a b l e t o c y c l i c a l change i n demand f o r i n t e r m e d i a t e and f i n i s h e d p r o d u c t s (Watson 1984 p.203; see a l s o S t a p l e t h e o r y - I n n i s 1979; Watkins 1963 and 1977; Weaver and Gunton 1982) The degree of s e n s i t i v i t y t o the b u s i n e s s c y c l e changes i n d u s t r y growth performance over the s h o r t t o medium run and t h i s i s an i m p o r t a n t f a c t o r i n i d e n t i f y i n g p r o p u l s i v e i n d u s t r i e s . I n d u s t r i e s w h i c h a r e p a r t i c u l a r l y s e n s i t i v e e x h i b i t s t r o n g changes i n output and employment i n response t o changes i n a g g r e g a t e demand which c h a r a c t e r i z e p e r i o d s of r e c e s s i o n and r e c o v e r y . C l e a r l y , changes i n the b u s i n e s s c y c l e a r e not the o n l y m a c r o - s c a l e economic f o r c e or t r e n d i n f l u e n c i n g i n d u s t r y p r o d u c t i o n . Other f a c t o r s such as p a t t e r n s of government i n v e s t m e n t , i n t e r n a t i o n a l changes i n c u r r e n c y v a l u a t i o n and t r a d e p o l i c y a l l modify the pace and the s c a l e of i n d u s t r y 62 growth and change (Browne 1978 p . 3 5 ) . These f a c t o r s can e i t h e r h e l p t o r e v e r s e s h o r t - t e r m i n d u s t r i a l d e c l i n e d u r i n g r e c e s s i o n s or e x a c e r b a t e l o c a l income and employment l o s s e s . 2.3.4 O l i g o p o l y An o l i g o p o l y i s a type of i n d u s t r y s t r u c t u r e i n which a few l a r g e f i r m s a r e a b l e t o d i r e c t l y c o n t r o l market p r i c e s , o utput and p r o f i t l e v e l s , p r o d u c t a t t r i b u t e s and t e c h n o l o g i c a l i n n o v a t i o n ( L i p s e y e t a l . 1982 p.296; Khemani 1985 p.135). I n d u s t r i e s and markets i n g e n e r a l a r e i m p e r f e c t l y c o m p e t i t i v e and the e x t e n t of o l i g o p o l y i n an i n d u s t r y i s m o d i f i e d by the f o l l o w i n g f o u r f a c t o r s . 1. The s i z e and growth of p r o d u c t markets. In g e n e r a l , i n d u s t r y c o n c e n t r a t i o n i s i n v e r s e l y r e l a t e d t o domestic market s i z e (Sawyer 1985 p.43; C u r r y and George 1983 p.217). S e c o n d l y , market growth t r e n d s i n f l u e n c e the d e c i s i o n s of f i r m s t o e n t e r and e x i t markets w i t h c o n c o m i t a n t e f f e c t s on i n d u s t r y c o n c e n t r a t i o n (Khemani 1985.p.157). 2. N a t u r a l and man-made b a r r i e r s t o market e n t r y . A n a t u r a l b a r r i e r t o market e n t r y i s the minimum e f f i c i e n t s c a l e of p r o d u c t i o n - t h e minimum s i z e of a f i r m r e q u i r e d t o c a p t u r e economies of s c a l e which l e a d t o d e c r e a s e d p r o d u c t i o n c o s t s and i n c r e a s e d p r o f i t s ( C u r r y and George 1983 p.218; Khemani 1985 p.159; Sawyer 1985 p.71-72). Other n a t u r a l b a r r i e r s t o market e n t r y i n c l u d e a b s o l u t e c o s t c o s t advantages i n o b t a i n i n g c a p i t a l , the use of p a t e n t s t o p r o t e c t new p r o d u c t s and p r o c e s s e s , and the c o n t r o l of r e s o u r c e i n p u t s e n j o y e d by l a r g e 63 f i r m s ( L i p s e y e t a l . 1982 p.300; C u r r y and George 1983 p.217-223; Sawyer 1985 p.73; McGee 1971 p.51). Man-made b a r r i e r s t o market e n t r y i n c l u d e a d v e r t i s i n g , p r o d u c t d i f f e r e n t i a t i o n , and p r e d a t o r y p r i c i n g which convey c o m p e t i t i v e advantages t o l a r g e f i r m s a l r e a d y e s t a b l i s h e d i n a market ( L i p s e y e t a l . 1982 p.300; Sawyer 1985 p.75; C u r r y and George 1983 p.217-223). 3. T e c h n o l o g i c a l i n n o v a t i o n and the e f f e c t s of new p r o d u c t s and p r o d u c t i o n p r o c e s s e s on the minimum e f f i c i e n t s c a l e of p r o d u c t i o n (Sawyer 1985 p.41). Abernathy (1978 p.19) argues t h a t new p r o d u c t and p r o d u c t i o n p r o c e s s i n n o v a t i o n s have c o n t r i b u t e d s i g n i f i c a n t l y t o the growth of o l i g o p o l y i n the American a u t o m o b i l e i n d u s t r y . T e c h n o l o g i c a l i n n o v a t i o n i s an i m p o r t a n t f a c t o r i n the growth of m u l t i n a t i o n a l c o r p o r a t i o n s (Thomas 1980). 4. C o r p o r a t e mergers i n v o l v i n g l e a d i n g e n t e r p r i s e s a r e a major f a c t o r c o n t r i b u t i n g t o i n c r e a s e d c o n c e n t r a t i o n i n Canadian non-f i n a n c i a l s e c t o r s and t h i s t r e n d i s i n c r e a s i n g (Khemani 1985 p.157). P o r t e r (1966) and Clement (1973, 1983) p r o v i d e an i n -depth a n a l y s i s of i n d u s t r y s t r u c t u r e and c o n c e n t r a t i o n i n the Canadian economy. ( f o r a more g e n e r a l d i s c u s s i o n of mergers see a l s o C u r r y and George 1983 p.247; Sawyer 1985 p.229; Howe 1978 p.152-153). These f o u r f a c t o r s p r o v i d e i m p o r t a n t a l t h o u g h l i m i t e d i n s i g h t s i n t o the causes of i n d u s t r y c o n c e n t r a t i o n and changes i n i n d u s t r y c o n c e n t r a t i o n i n the absense of a f u l l y d e t e r m i n a t e t h e o r y of i n d u s t r y - development. Contemporary i n d u s t r i a l economics and o r g a n i z a t i o n a l t h e o r i e s of t h e f i r m s t r o n g l y 64 c h a l l e n g e c o n v e n t i o n a l assumptions of p r o f i t m a x i m i z a t i o n as the p r i m a r y m o t i v a t i o n f o r c o r p o r a t e d e c i s i o n m a k i n g (Sawyer 1985 p.70; L i p s e y e t a l . 1982 p.250). S t o r p e r (1985) i s s t r o n g l y c r i t i c a l of contemporary t h e o r i e s of o l i g o p o l y which f a i l t o a d d r e s s l o n g - r u n changes i n b a r r i e r s t o market e n t r y , t e c h n o l o g y and income l e v e l s . Economic f a c t o r s i n f l u e n c i n g o l i g o p o l y p o s s e s s c o n s i d e r a b l e dynamism. C o n c e n t r a t i o n l e v e l s . . . c a n n o t be p r e d i c t e d a p r i o r i u n l e s s we a c q u i r e more i n f o r m a t i o n than we now p o s s e s s c o n c e r n i n g the r e l a t i v e s t r e n g t h and d e t a i l e d n a t u r e of the v a r i o u s f o r c e s . As t o changes i n c o n c e n t r a t i o n , the r e l a t i v e f o r c e of v a r i o u s c o n c e n t r a t i o n - i n c r e a s i n g or c o n c e n t r a t i o n - d e c r e a s i n g f o r c e s may a l t e r s i g n i f i c a n t l y t h r ough t i m e . S c a l e economies may become more or l e s s i m p o r t a n t because of t e c h n o l o g i c a l changes. E n t r y b a r r i e r s based on p a t e n t or r e s o u r c e c o n t r o l may w i t h e r away or new ones may emerge. P r o d u c t developments may undercut o l d p r o d u c t d i f f e r e n t i a t i o n b a r r i e r s t o e n t r y . L e g a l r e s t r i c t i o n s on c o n c e n t r a t i o n may be t i g h t e n e d or s l a c k e n e d . M a r kets may grow more of l e s s r a p i d l y . The f u t u r e c o u r s e of changes i n c o n c e n t r a t i o n cannot be f o r e s e e n u n t i l changes i n a l l t h e s e d i m e n s i o n s can be p r e d i c t e d , and t h e i r p r o b a b l e consequences a p p r a i s e d . In our p r e s e n t s t a t e of knowledge, t h e r e f o r e , we cannot f u l y e x p l a i n or r a t i o n a l i z e the e v o l u t i o n of c o n c e n t r a t i o n i n the p a s t or a c c u r a t e l y p r e d i c t i t s f u t u r e c o u r s e ( B a i n 1968 p.213). The n e g a t i v e e f f e c t s of o l i g o p o l y on an economy a r e u s u a l l y measured i n terms of pr o d u c t p r i c e s , p r o f i t s and the e f f i c i e n t a l l o c a t i o n of r e s o u r c e s i n p r o d u c t i o n ( c a p i t a l , l a b o u r , raw m a t e r i a l s , and so o n ) . On one hand, many eco n o m i s t s argue t h a t o l i g o p o l y l e a d s t o i n c r e a s e d c o r p o r a t e p r o f i t s t h r o u g h h i g h e r p r o d u c t p r i c e s and the i n e f f i c i e n t a l l o c a t i o n of r e s o u r c e s ( M a n s f i e l d 1979 p.359-60; Sawyer 1985 p.101; B a l d w i n e t a l . 1984 p.2; Khemani 1985 p.136). Other economists argue t h a t h i g h e r p r o f i t s , p r o d u c t p r i c e s and the m i s a l l o c a t i o n of r e s o u r c e s a r e 65 not i n e v i t a b l e consequences of o l i g o p o l y (McGee, 1970). For example, Baumol et a l . (1982) suggest t h a t i n markets which a r e " c o n t e s t a b l e , " the ease of market e n t r y c o n t r o l s p r o d u c t p r i c e s and the p r o f i t s of o l i g o p o l i s t i c f i r m s . The e f f e c t s of o l i g o p o l y on c o r p o r a t e p r o f i t s , p r o d u c t p r i c e s and the a l l o c a t i o n of r e s o u r c e s a r e of secondary importance i n i d e n t i f y i n g the c h a r a c t e r i s t i c s of p r o p u l s i v e i n d u s t r i e s . O l i g o p o l i s t i c i n d u s t r i e s f r e q u e n t l y dominate l o c a l economies and.hinder the development of new g e n e r a t i o n s of l o c a l i n d u s t r i e s w i t h p r o p u l s i v e p o t e n t i a l . T h i s reduces the a b i l i t y of urban economies t o adapt t o c y c l i c a l and s t r u c t u r a l economic change. O l i g o p o l i s t i c i n d u s t r i e s a r e c a p a b l e of r a p i d and e x t e n s i v e r a t i o n a l i z a t i o n and r e s t r u c t u r i n g i n the f a c e of growing c o m p e t i t i o n and d e c l i n i n g p r o f i t s o f t e n r e s u l t i n g i n l a r g e l o s s e s i n l o c a l income and employment (Markusen 1985 p . 12). O l i g o p o l i s t i c i n d u s t r i e s change l o c a l economies by d o m i n a t i n g s u p p l i e s of l a b o u r , c a p i t a l and e n t r e p r e n e u r s h i p (Markusen 1985 p.281-282). H i g h e r wages and s t a b l e employment over the medium-term a t t r a c t l o c a l l a b o u r and t e n d t o r e s t r i c t the s u p p l y of workers f o r o t h e r l o c a l i n d u s t r i e s . The s u p p l y of l o c a l c a p i t a l f o r f i n a n c i n g new i n d u s t r i e s can be r e s t r i c t e d by the r e t a i n i n g of e a r n i n g s w i t h i n o l i g o p o l i s t i c c o r p o r a t i o n s and the subsequent t r a n s f e r t o o t h e r c o r p o r a t e f u n c t i o n s . The d o m i n a t i o n of a l o c a l economy by an o l i g o p o l i s t i c i n d u s t r y reduces the development of new autonomous l o c a l i n d u s t r i e s w i t h s t r o n g p r o p u l s i v e p o t e n t i a l . L o c a l e n t r e p r e n e u r s t e n d t o 66 c o n c e n t r a t e on s e r v i c i n g the needs of t h e o l i g o p o l i s t i c c o r p o r a t i o n . The a g g l o m e r a t i o n of l o c a l i n d u s t r i e s l i n k e d t o an o l i g o p o l i s t i c i n d u s t r y g i v e s an appearence of s t r o n g l o c a l economic i n t e g r a t i o n and d i v e r s i t y . T h i s appearence i s m i s l e a d i n g s i n c e the f o r t u n e s of s m a l l e r l o c a l i n d u s t r i e s a r e dependent on growth t r e n d s i n the o l i g o p o l i s t i c i n d u s t r y . In a d d i t i o n , o l i g o p o l i e s e x e r t s t r o n g p o l i t i c a l i n f l u e n c e s i n o r d e r t o g a i n p r e f e r e n t i a l t r e a t m e n t a t the l o c a l , r e g i o n a l and n a t i o n a l l e v e l (Markusen 1985). O f t e n t h e r e i s l i t t l e p o l i t i c a l a n t i c i p a t i o n of the need f o r or r o l e of new and d i f f e r e n t i n d u s t r i e s which pos s e s s s t r o n g p r o p u l s i v e p o t e n t i a l . There a r e c r i t i c a l weaknesses i n depending on o l i g o p o l i s t i c i n d u s t r i e s t o p r o p e l urban economic growth as o r i g i n a l l y p r oposed by Pe r r o u x ( 1 9 5 5 - t r a n s l a t e d 1981) and B o u d e v i l l e (1966). Many such i n d u s t r i e s e x h i b i t s t r o n g l e a k a g e s i n o u t p u t , employment and income through f o r w a r d and backward l i n k a g e s t o o t h e r r e g i o n s . Second, t h e r e i s l i t t l e s upport f o r Schumpeterian a s s e r t i o n s t h a t o l i g o p o l i s t i c i n d u s t r i e s a r e a c r i t i c a l s o u r c e of t e c h n o l o g i c a l i n n o v a t i o n and new p r o d u c t s / p r o c e s s e s (Sawyer 1985 p.101). Abernathy (1978 p.3) argues t h a t o l i g o p o l y i n the U.S. a u t o m o b i l e i n d u s t r y has c o n s t r a i n e d i n n o v a t i o n due t o the h i g h l o s s e s i n p r o d u c t i v i t y a s s o c i a t e d w i t h m o d i f y i n g l a r g e - s c a l e r o u t i n i z e d p r o d u c t i o n systems t o accomodate new p r o d u c t s and p r o c e s s e s . Long-term o l i g o p o l i e s have been noted by i n d u s t r i a l o r g a n i z a t i o n r e s e a r c h e r s t o be r e l a t i v e l y poor i n n o v a t o r s , p r e - o c c u p i e d w i t h market management and c o m p e t i t i v e s t a b i l i t y . Some of the s t r o n g e s t U.S. 67 i n d u s t r i e s have a t r o p h i e d under the weight of l o n g -term o l i g o p o l y , u l t i m a t e l y v u l n e r a b l e t o c o m p e t i t i o n from modernized y o u t h f u l c o u n t e r p a r t s i n Europe, Japan, or d e v e l o p i n g c o u n t r i e s (Markusen 1985 p . 2 4 ) . Over the l o n g - r u n , the f a i l u r e t o i n n o v a t e l e a d s t o i n d u s t r y d e c l i n e i n the f a c e of growing c o m p e t i t i o n from domestic and f o r e i g n p r o d u c t s u b s t i t u t e s . E m p i r i c a l e v i d e n c e p r o v i d e d by Markusen (1985 p.256) s u g g e s t s t h a t o l i g o p o l y o f t e n p r o l o n g s the p e r i o d of i n d u s t r y growth but t h a t many such i n d u s t r i e s (such as s t e e l , t i r e s , a u t o s ) have e x p e r i e n c e d s u b s t a n t i a l d e c l i n e over the l o n g r u n . In such c a s e s , o l i g o p o l i s t i c i n d u s t r i e s • have demonstrated the a b i l i t y t o r a p i d l y r a t i o n a l i z e and r e s t r u c t u r e p r o d u c t i o n . Urban economies which are dependent on t h e c o n t i n u e d growth of an o l i g o p o l i s t i c i n d u s t r y e x p e r i e n c e s i g n i f i c a n t income and employment l o s s e s when t h i s i n d u s t r y d e c l i n e s . W h i l e change i s a v i t a l c h a r a c t e r i s t i c of a l l i n d u s t r i e s , o l i g o p o l y tends t o a c c e l e r a t e t h e pace and s c a l e of s t r u c t u r a l and s p a t i a l change i n mature and d e c l i n i n g i n d u s t r i e s . At the same t i m e , the dominance of l o c a l c a p i t a l , l a b o u r and e n t r e p r e n e u r i a l r e s o u r c e s h i n d e r s the development of new i n d u s t r i e s w i t h expanding market demand. F i n a l l y , the s t r o n g u n i o n s t h a t o l i g o p o l i e s t e n d t o encourage may d i s c o u r a g e the a t t r a c t i o n of new f o o t l o o s e i n d u s t r i e s (Markusen 1985 p.281). A d d i t i o n a l i n s i g h t s i n t o the p o t e n t i a l n e g a t i v e e f f e c t s of o l i g o p o l i s t i c i n d u s t r i e s on urban economic growth a r e p r o v i d e d by B l u e s t o n e and H a r r i s o n (1982) and Massey and Meegan (1982). B l u e s t o n e and H a r r i s o n (1982 p.119) document the growing l e v e l of c o n c e n t r a t i o n i n U.S. m a n u f a c t u r i n g i n d u s t r i e s d u r i n g the 68 1960s and 70s. Many i n d u s t r i e s f a c e d w i t h market d e c l i n e i n mature p r o d u c t s r a t i o n a l i z e d p r o d u c t i o n , r e l o c a t e d m a n u f a c t u r i n g t o p l a c e s w i t h lower l a b o u r c o s t s and/or r e s t r u c t u r e d by c l o s i n g o l d e r m a n u f a c t u r i n g p l a n t s and p u r c h a s i n g newer or d i f f e r e n t i n d u s t r i e s ( B l u e s t o n e and H a r r i s o n 1982 p.26). F u r t h e r e v i d e n c e s u g g e s t i n g t h a t i n c r e a s e d i n d u s t r y c o n c e n t r a t i o n f a c i l i t a t e s r a t i o n a l i z i n g and r e l o c a t i o n i s p r o v i d e d by B l a k e l y and S h a p i r a (1984), Young and M i l l s (1982), E d g i n g t o n (1982) and Friedmann and W o l f f (1982). There remains c o n s i d e r a b l e u n c e r t a i n t y i n p r e d i c t i n g a p r i o r i the n e g a t i v e e f f e c t s of i n d u s t r y c o n c e n t r a t i o n on an urban economy. The n e g a t i v e e f f e c t s of o l i g o p o l y on an i n d u s t r y ' s a b i l i t y t o p r o p e l urban economic growth and change a r e dependent on the v a r i a b l e and unique c h a r a c t e r i s t i c s of i n d u s t r y s t r u c t u r e ; the s t r u c t u r e and u n d e r l y i n g s t r e n g t h of urban economies; dynamic and v a r i a b l e t r e n d s i n t e c h n o l o g y ; and macro-economic f o r c e s a f f e c t i n g changes i n the l e v e l of n a t i o n a l income which a l l s i g n i f i c a n t l y modify the pace and the s c a l e of i n d u s t r y adjustment t o c y c l i c a l and s t r u c t u r a l economic change. These c o n c e p t u a l u n c e r t a i n t i e s s t r o n g l y l i m i t the use of i n d u s t r y c o n c e n t r a t i o n as a c h a r a c t e r i s t i c f o r i d e n t i f y i n g p r o p u l s i v e i n d u s t r i e s i n advanced m e t r o p o l i t a n economies. 2.4 C o n c l u s i o n s E x i s t i n g t h e o r i e s and e m p i r i c a l r e s e a r c h i n urban and r e g i o n a l economics and b u s i n e s s / i n d u s t r i a l economics p r o v i d e an enormous d i v e r s i t y of i n s i g h t s i n t o i n d u s t r y c h a r a c t e r i s t i c s which p r o p e l growth and change i n urban economies. Urban 69 economies a r e complex and dynamic and the c h a r a c t e r i s t i c s of i n d u s t r i e s which p r o p e l t h i s growth and change a r e e q u a l l y complex and dynamic. T h i s c h a p t e r r e p r e s e n t s a s t e p towards a more comprehensive and a n a l y t i c a l d e s c r i p t i o n of p r o p u l s i v e c h a r a c t e r i s t i c s by a d d r e s s i n g the e x i s t i n g i n s i g h t s on b a s i c p r o p u l s i v e mechanisms, and economic f a c t o r s which change these p r o p u l s i v e mechanisms over the s h o r t t o l o n g r u n . The work of P e r r o u x ( 1 9 5 5 - t r a n s l a t e d 1981) and l a t e r growth p o l e t h e o r i s t s ( B o u d e v i l l e 1966; K u k l i n s k i 1972; Lasuen 1972; Darwent 1975; Thomas 1972,1975) p r o v i d e s a s t a r t i n g p o i n t f o r e n q u i r i n g i n t o the p r o p u l s i v e c h a r a c t e r i s t i c s of i n d u s t r i e s . Growth p o l e t h e o r y s u g g e s t s t h a t a p r o p u l s i v e i n d u s t r y e x h i b i t s s t r o n g growth and a s u b s t a n t i a l a b i l i t y t o t r a n s m i t growth i m p u l s e s t o o t h e r i n d u s t r i e s t h r o u g h i n p u t and o u t p u t l i n k a g e s . P e r r o u x a l s o suggested t h a t t e c h n o l o g i c a l i n n o v a t i o n was an i m p o r t a n t f a c t o r i n i n d u s t r y growth and change over t i m e . H i s d i s c u s s i o n of the r o l e of i n n o v a t i o n i n i n d u s t r y growth and change was p o o r l y f o r m a l i z e d and subsequent growth p o l e t h e o r i s t s ( B o u d e v i l l e 1966) emphasized the a b i l i t y t o t r a n s m i t growth i m p u l s i e s t h r o u g h i n t e r - i n d u s t r y l i n k a g e s as the p r i n c i p a l c h a r a c t e r i s t i c of a p r o p u l s i v e i n d u s t r y . An i n d u s t r y w i t h s t r o n g l o c a l l i n k a g e s s t i m u l a t e s changes i n o v e r a l l l o c a l output and employment much l a r g e r than i t s own changes i n p r o d u c t i o n . S t r o n g e x t e r n a l l i n k a g e s reduce the a b i l i t y of an i n d u s t r y t o p r o p e l l o c a l economic growth t h r o u g h d i r e c t and i n d i r e c t l i n k a g e s . In such c a s e s l o c a l economic growth i s dependent upon the l o c a l spending of wages by w o r k e r s . 70 Growth p o l e and economic base t h e o r i e s a d d r e s s aggregate changes i n income and employment. In a d d i t i o n , i n d u s t r i e s i n f l u e n c e the d i s t r i b u t i o n of income and employment w i t h i n urban p o p u l a t i o n s . An u n d e r s t a n d i n g of how growth and change i n i n d u s t r i a l p r o d u c t i o n i n f l u e n c e s the d i s t r i b u t i o n of income and employment i n urban economies i s e s s e n t i a l f o r i d e n t i f y i n g p r o p u l s i v e i n d u s t r i e s . Recent r e s e a r c h on p o s t - i n d u s t r i a l urban economic development ( f o r example, B e l l 1974; Stanback 1979) has made i m p o r t a n t c o n t r i b u t i o n s t o an u n d e r s t a n d i n g of how i n d u s t r y growth and change i n f l u e n c e s the d i s t r i b u t i o n of income and employment w i t h i n urban p o p u l a t i o n s . Economic r e s e a r c h e r s use o c c u p a t i o n a l r e q u i r e m e n t s t o a n a l y z e how i n d u s t r i e s i n f l u e n c e the d i s t r i b u t i o n of income and employment. Workers employed i n low-wage, l o w - s k i l l o c c u p a t i o n s f a c e s i g n i f i c a n t o b s t a c l e s i n moving i n t o h i g h e r wage and s k i l l j o b s . D e c l i n e or r e s t r u c t u r i n g i n m a n u f a c t u r i n g i n d u s t r i e s and conco m i t a n t growth i n s e r v i c e s has l e d t o s t r u c t u r a l unemployment f o r s k i l l e d , s e m i - s k i l l e d and u n s k i l l e d m a n u f a c t u r i n g w o r k e r s . I t remains u n c l e a r whether p a r t - t i m e employment s h o u l d be viewed as a s t e p down from f u l l - t i m e work or as a s t e p up from unemployment. In a one t o one compa r i s o n , a f u l l - t i m e j o b i s a l a r g e r source of e a r n i n g s than a p a r t - t i m e j o b . An a n a l y s i s of i n p u t and output l i n k a g e s p r o v i d e s a s t a t i c framework f o r e x p l o r i n g the p r o p u l s i v e r e l a t i o n s h i p s between i n d u s t r i e s and the l o c a l economy. A d e s c r i p t i o n of the s t r e n g t h and d i v e r s i t y of l o c a l p u r c h a s e s and s a l e s between i n d u s t r i e s 71 does not i n d i c a t e how t h e s e purchase and s a l e s r e l a t i o n s h i p s are c h a n g i n g over t i m e . T h i s approach t o i d e n t i f y i n g p r o p u l s i v e i n d u s t r i e s i s i n h e r e n t l y l i m i t e d because i t f a i l s t o a ddress the dynamic s t r u c t u r e of urban economies and the c h a n g i n g r o l e s of i n d i v i d u a l i n d u s t r i e s i n p r o p e l l i n g urban economic growth and change. Change i s a fundamental component of the p r o p u l s i v e e f f e c t s which i n d u s t r i e s e x e r t on urban economies. Four economic f a c t o r s which s t i m u l a t e changes i n the p r o p u l s i v e c h a r a c t e r i s t i c s of i n d u s t r i e s over the s h o r t t o l o n g run are t e c h n o l o g i c a l i n n o v a t i o n , market o r i e n t a t i o n , s e n s i t i v i t y t o the b u s i n e s s c y c l e and o l i g o p o l y . Economic r e s e a r c h e r s m a i n t a i n a c a u t i o u s approach i n s t a t i n g the c a u s a l r e l a t i o n s h i p s between each f a c t o r and i n d u s t r y growth and change. T h i s i s an i n d i c a t o r of the s i g n i f i c a n t c h a l l e n g e s i n v o l v e d i n u n d e r s t a n d i n g the economic f o r c e s which s t i m u l a t e i n d u s t r i e s t o grow and change over the s h o r t t o l o n g r u n. T e c h n o l o g i c a l i n n o v a t i o n i s a major f a c t o r i n i n d u s t r y growth and change which o f t e n r e q u i r e s s u b s t a n t i a l adjustment by workers t o changes i n p r o d u c t i o n a c t i v i t i e s . P r o d u c t and i n n o v a t i o n c y c l e t h e o r i e s p r o v i d e c o n c e p t u a l i n s i g h t s i n t o the r e l a t i o n s h i p s between i n n o v a t i o n and i n d u s t r y growth and change over t i m e . I n d u s t r i e s respond t o the c o m p e t i t i v e c h a l l e n g e s of c h a n g i n g markets by i n n o v a t i n g . The f a i l u r e t o i n n o v a t e o f t e n l e a d s t o i n d u s t r y d e c l i n e as p r o d u c t s u b s t i t u t e s d e v e l o p e d by c o m p e t i t o r s become a v a i l a b l e . W h i l e i n n o v a t i o n has s t r o n g l y been a s s o c i a t e d w i t h p r o d u c t r e s e a r c h and development, many 72 i n d u s t r i e s engage i n i n n o v a t i o n by p u r c h a s i n g and a d a p t i n g e x i s t i n g t e c h n o l o g y ( f o r example, m i c r o p r o c e s s o r s ) . P r o d u c t and p r o d u c t i o n p r o c e s s i n n o v a t i o n i n v o l v e s a h i g h degree of replacement of e x i s t i n g p r o d u c t s and p r o c e s s e s . T h i s r e q u i r e s a d j u s t m e n t s by workers which i n c l u d e t r a i n i n g i n new j o b s k i l l s and i n the case of m a n u f a c t u r i n g l a b o u r , the movement t o e n t i r e l y new o c c u p a t i o n s o f t e n i n s e r v i c e i n d u s t r e s . In s p i t e of the enormous r e s e a r c h t o d a t e , t h e r e i s no s a t i s f a c t o r y d e f i n i t i o n of t e c h n o l o g i c a l i n n o v a t i o n which a d d r e s s e s the n a t u r e of t h i s complex p r o c e s s r a t h e r than the r e s u l t - n e w p r o d u c t s and p r o c e s s e s . M a l e c k i ' s c o n t e n t i o n (1984 p.292) t h a t i n n o v a t i o n i s made up of n o n - r o u t i n e p r o d u c t i o n a c t i v i t i e s p r o v i d e s one avenue f o r f u r t h e r r e s e a r c h . S e c o n d l y , e m p i r i c a l work needs t o be done on the e f f e c t s of c o n t i n u o u s i n n o v a t i o n s on i n d u s t r y growth and change r a t h e r than c o n c e n t r a t i n g on d i s c r e t e p r o d u c t and p r o c e s s i n n o v a t i o n s ( S t e e d 1982 p.34). T h i r d , the n o n - l i n e a r r e l a t i o n s h i p between i n n o v a t i o n and i n d u s t r y growth needs t o be i n v e s t i g a t e d . Does more i n n o v a t i o n always l e a d t o more i n d u s t r y growth? I n d u s t r y growth i s s t r o n g l y i n f l u e n c e d by changes i n demand and c o m p e t i t i o n i n domestic and i n t e r n a t i o n a l m a rkets. Many Canadian i n d u s t r i e s a r e dependent on e x p o r t markets as a v i t a l s o u r c e of expanding demand. E x p o r t markets p r o v i d e i m p o r t a n t growth o p p o r t u n i t i e s , but t o t a k e advantage, l o c a l i n d u s t r i e s must overcome s u b s t a n t i a l c o m p e t i t i v e b a r r i e r s . Changes i n e x p o r t s a l e s a r e t h e r e f o r e a u s e f u l i n d i c a t o r of the c o m p e t i t i v e n e s s and growth p o t e n t i a l of an i n d u s t r y . 73 As the pace of t e c h n o l o g i c a l i n n o v a t i o n i n many i n d u s t r i e s i n c r e a s e s , and e x i s t i n g b a r r i e r s t o t r a d e d e c l i n e , Canadian i n d u s t r i e s w i l l f a c e i n c r e a s i n g p r e s s u r e from c o m p e t i t o r s i n domestic as w e l l as e x p o r t markets. C o n c e p t u a l l y , import s u b s t i t u t i o n can p r o v i d e growth o p p o r t u n i t i e s f o r l o c a l i n d u s t r i e s . However, t h e r e i s l i t t l e e m p i r i c a l e v i d e n c e t h a t import s u b s t i t u t i o n has been a major f a c t o r i n the growth of any Canadian i n d u s t r y . There i s g r e a t e r c oncern on the p a r t of economic r e s e a r c h e r s over the v u l n e r a b i l i t y of Canadian i n d u s t r i e s t o import p e n e t r a t i o n of domestic markets. The o p p o r t u n i t i e s f o r import p e n e t r a t i o n a r e i n c r e a s i n g over time and changes i n the domestic market share of l o c a l i n d u s t r i e s i s an i m p o r t a n t i n d i c a t o r of c o m p e t i t i v e performance and growth p o t e n t i a l . I n d u s t r y o u t p u t and employment change over the s h o r t t o medium term i n response t o the b u s i n e s s c y c l e . Urban and r e g i o n a l economic r e s e a r c h e r s have l a r g e l y c o n c e n t r a t e d on the r e l a t i o n s h i p s between i n d u s t r y mix and the s e n s i t i v i t y of l o c a l and r e g i o n a l economies t o r e c e s s i o n (Browne 1978; Syron 1978). T h i s r e s e a r c h i n d i c a t e s t h a t i n d u s t r i e s v a r y s i g n i f i c a n t l y i n out p u t and employment over the b u s i n e s s ' c y c l e and t h a t the degree of i n d u s t r y s e n s i t i v i t y t o c y c l i c a l economic change can be p a r t i a l l y e x p l a i n e d by the income e l a s t i c i t y of demand f o r goods or s e r v i c e s . I n d u s t r i e s which a r e s e n s i t i v e t o economic r e c e s s i o n and e x p a n s i o n e x h i b i t a r e c u r r i n g p a t t e r n of output and employment d e c l i n e and growth. An i n d u s t r y w i t h s t r o n g l o c a l l i n k a g e s and a h i g h l e v e l of s e n s i t i v i t y t o r e c e s s i o n may 74 t r i g g e r a s u b s t a n t i a l d e c l i n e i n l o c a l income and employment over the short to medium run. A dangerous assumption of the s t a t i c models of p r o p u l s i v e i n d u s t r i e s developed by Perroux (1955) and Boudevile (1966) i n v o l v e s the growth s t i m u l a t i n g e f f e c t s of o l i g o p o l y . The a b i l i t y of an o l i g o p o l i s t i c i n d u s t r y to dominate a l o c a l economy by s i z e and purchases and s a l e s c r e a t e s s u b s t a n t i a l l o c a l economic growth over the short to medium term but o f t e n has negative consequences f o r l o c a l economies over the long run. The domination of l o c a l c a p i t a l and labour resources by an o l i g o p o l i s t i c i n d u s t r y l e a v e s a l o c a l economy with a weak base of independent i n d u s t r i e s and l i m i t e d o p p o r t u n i t i e s f o r developing new sources of employment growth d u r i n g p e r i o d s of economic downturn or s t r u c t u r a l economic change. In the face of r i s i n g c o m p e t i t i o n and d e c l i n i n g p r o f i t s , o l i g o p o l i e s have demonstrated the a b i l i t y to r a p i d l y r a t i o n a l i z e and r e s t r u c t u r e p r o d u c t i o n l e a d i n g to income and employment l o s s e s f o r l o c a l economies. The c o n c e n t r a t i o n of p r o d u c t i o n i n the hands of a few l a r g e f i r m s i s a c h a r a c t e r i s t i c of an i n d u s t r y which can l e a d to damaging consequences f o r l o c a l economies over the long run. There remains, however, c o n s i d e r a b l e u n c e r t a i n t y i n p r e d i c t i n g the negative e f f e c t s of o l i g o p o l y on an i n d u s t r y ' s a b i l i t y to p r o p e l urban economic growth and change. T h i s u n c e r t a i n t y s t r o n g l y l i m i t s the use of i n d u s t r y c o n c e n t r a t i o n as a c h a r a c t e r i s t i c f o r i d e n t i f y i n g p r o p u l s i v e i n d u s t r i e s . In urban and r e g i o n a l economic r e s e a r c h and p o l i c y 75 a n a l y s i s , the d e s c r i p t i o n of i n d u s t r i e s which a r e c r i t i c a l f o r economic growth has l a r g e l y c o n c e n t r a t e d on one or two p r o p u l s i v e c h a r a c t e r i s t i c s . For example, t e c h n o l o g y i n t e n s i v e i n d u s t r i e s a r e o f t e n i d e n t i f i e d as an im p o r t a n t s o u r c e of l o c a l , r e g i o n a l and n a t i o n a l economic growth ( M a l e c k i 1984; Steed 1982; B r i t t o n and G i l m o u r 1978). The a b i l i t y of an i n d u s t r y t o p r o p e l growth and change i n an urban economy i s a complex and dynamic phenomenon and t h e r e a re a l a r g e number of c h a r a c t e r i s t i c s which t o g e t h e r d e t e r m i n e the p r o p u l s i v e n e s s of an i n d u s t r y . The p r o p u l s i v e mechanisms and economic f a c t o r s d i s c u s s e d i n t h i s c h a p t e r c o n t r i b u t e t o a composite d e s c r i p t i o n of the p r o p u l s i v e e f f e c t s of an i n d u s t r y on an urban economy and can a l s o be used t o make comparisons between the p r o p u l s i v e c a p a b i l i t i e s of d i f f e r e n t i n d u s t r i e s . U s i n g t h e s e c h a r a c t e r i s t i c s t o make comparisons between i n d u s t r i e s and t o i d e n t i f y t he most p r o p u l s i v e ones, r e q u i r e s the f o r m u l a t i o n of c r i t e r i a w i t h s p e c i f i c q u a n t i t a t i v e measures and g u i d e l i n e s . T h i s c h a l l e n g e i s taken up i n c h a p t e r 3. 7 6 I I I . FORMULATING CRITERIA FOR IDENTIFYING PROPULSIVE INDUSTRIES 3.1 Introduction In chapter 3 the opportunities and l i m i t s in formulating c r i t e r i a for i d e n t i f y i n g propulsive industries are examined. A c r i t e r i o n i s a rule or p r i n c i p l e which makes possible authoritative judgements about the nature of an object or process. There are two essential requirements in formulating c r i t e r i a for i d e n t i f y i n g propulsive industries. The f i r s t requirement i s a set of quantitative measures of the propulsive c h a r a c t e r i s t i c s of industries. The second requirement i s a set of guidelines for evaluating the quantitative measures of propulsive performance. Does the observed performance of an industry (for a s p e c i f i c measure) make i t more or less propulsive in comparison to other industries? The c r i t e r i a are based on the discussion of propulsive c h a r a c t e r i s t i c s in chapter 2 and are formulated using ex i s t i n g quantitative measures and guidelines from urban and regional economic research. The opportunities and l i m i t s in formulating c r i t e r i a for i d e n t i f y i n g propulsive industries are discussed with reference to the following industry c h a r a c t e r i s t i c s : -Industry Size -Growth Performance -Average Worker Earnings -Employment Earnings P r o f i l e -Match of Occupational Demand with Local Unemployment -M u l t i p l i e r Performance -Innovation Intensity -Export Orientation - V u l n e r a b i l i t y to Import -Penetration of Domestic Markets - S e n s i t i v i t y to the Business Cycle -Industry Concentration 77 The d i s c u s s i o n of each c r i t e r i o n examines the q u a n t i t a t i v e measures used; the r o l e of each c r i t e r i o n i n measuring d i f f e r e n c e s between i n d u s t r i e s i n p r o p u l s i v e c a p a b i l i t i e s ; key assumptions and l i m i t a t i o n s a s s o c i a t e d w i t h measures and g u i d e l i n e s ; and the i d e n t i f i c a t i o n of p a r t i c u l a r l y c h a l l e n g i n g d a t a r e q u i r e m e n t s . For each c r i t e r i o n , the d i s c u s s i o n of g u i d e l i n e s i s based on the assumption t h a t a l l o t h e r p r o p u l s i v e c h a r a c t e r i s t i c s a r e h e l d e q u a l . T h i s a ssumption makes i t p o s s i b l e t o f o c u s on the s p e c i f i c i n s i g h t s a f f o r d e d by each q u a n t i t a t i v e measure. The q u a n t i t a t i v e measures and g u i d e l i n e s a r e f a r from d e f i n i t i v e . They a r e s i m p l y t h e b e s t t h a t can be done u s i n g e x i s t i n g urban and r e g i o n a l economic r e s e a r c h methods and i n s i g h t s . The assumptions and l i m i t a t i o n s a s s o c i a t e d w i t h the g u i d e l i n e s and measures a r e i n c l u d e d t o show the r e l i a b i l i t y of each c r i t e r i o n and t o p o i n t out o p p o r t u n i t i e s f o r f u r t h e r r e s e a r c h . Data on the p r o p u l s i v e c h a r a c t e r i s t i c s of l o c a l i n d u s t r i e s can be d i s p l a y e d i n a m a t r i x ( i n d u s t r i e s by c r i t e r i a ) . P r o p u l s i v e i n d u s t r i e s can be i d e n t i f i e d by o v e r a l l performance a c r o s s a l l of the c r i t e r i a or by the s e l e c t i v e use of c r i t e r i a based on a s e t of p o l i t i c a l p r i o r i t i e s . T r a d e - o f f s i n d e t e r m i n i n g l o c a l p r o p u l s i v e i n d u s t r i e s are i n e v i t a b l e g i v e n the complex i n t e r - a c t i o n s between i n d u s t r i e s and the l o c a l economy, and the d i v e r s e o b j e c t i v e s and i n t e r e s t s a s s o c i a t e d w i t h l o c a l economic development p o l i c y . A m a t r i x d i s p l a y i n g the p r o p u l s i v e c h a r a c t e r i s t i c s of l o c a l i n d u s t r i e s i s an i m p o r t a n t t o o l f o r l o c a l economic p o l i c y m a k e r s because i t can be used t o uncover 78 and a n a l y s e the t r a d e - o f f s which r e s u l t from the s e t t i n g of p r i o r i t i e s among c r i t e r i a . 3.2 C r i t e r i a For I d e n t i f y i n g P r o p u l s i v e I n d u s t r i e s 3.2.1 I n d u s t r y S i z e The s i z e of an i n d u s t r y , measured by t o t a l employment or val u e - a d d e d , i s the s i m p l e s t c r i t e r i o n f o r i d e n t i f y i n g p r o p u l s i v e i n d u s t r i e s . A l a r g e i n d u s t r y i s more p r o p u l s i v e than a s m a l l e r i n d u s t r y because i t g e n e r a t e s a g r e a t e r share of o v e r a l l income and employment ( o t h e r p r o p u l s i v e c h a r a c t e r i s t i c s h e l d e q u a l ) . W h i l e output and s a l e s a re a l s o common measures of i n d u s t r y s i z e , both f a i l t o account f o r the c o s t of i n t e r m e d i a t e i n p u t s i n t o the p r o d u c t i o n of goods and s e r v i c e s f o r f i n a l demand ( L i p s e y et a l . 1982 p.560). Value-added, a measure of the d i f f e r e n c e between the v a l u e of o u t p u t s and the c o s t of p r o d u c t i o n i n p u t s (Bannock et a l . 1984 p.446) i s a more a p p r o p r i a t e u n i t f o r measuring i n d u s t r y s i z e and growth than output or s a l e s . The a v a i l a b i l i t y of d a t a a t the m e t r o p o l i t a n l e v e l i s an im p o r t a n t f a c t o r i n d e t e r m i n i n g whether t o use employment or value-added t o measure the s i z e of l o c a l i n d u s t r i e s ( r e f e r t o c h a p t e r 4 ) . 3.2.2 Growth Performance M e a s u r i n g i n d u s t r y growth performance p r o v i d e s i n s i g h t i n t o the r o l e of each i n d u s t r y i n o v e r a l l urban economic growth and s t r u c t u r a l change. A common measure of growth performance i s the net change i n employment over time (Economic C o u n c i l Canada 1984 p.68; H a l l 1986). A l o c a l i n d u s t r y w i t h a g r e a t e r net 79 growth i n employment (1981-1986) i s more p r o p u l s i v e than an i n d u s t r y w i t h weaker net employment growth. P e r c e n t a g e changes i n i n d u s t r y employment (or value-added) can a l s o be used t o d e s c r i b e i n d u s t r y growth performance, but p e r c e n t a g e growth o b s c u r e s the d i f f e r e n c e s between i n d u s t r i e s i n c o n t r i b u t i n g t o o v e r a l l urban economic a c t i v i t y . For example, one i n d u s t r y may h i r e 500 p e o p l e over the c o u r s e of t h r e e y e a r s and grow at a r a t e of 5%. A d i f f e r e n t i n d u s t r y may h i r e 100 p e o p l e over the same p e r i o d and grow at a r a t e of 20%. W h i l e the second i n d u s t r y grew f a s t e r , the f i r s t one has a g r e a t e r e f f e c t on o v e r a l l urban employment. For t h i s r e a s o n , net employment growth i s a more a p p r o p r i a t e q u a n t i t a t i v e measure f o r t h i s c r i t e r i o n . 3.2.3 Average Worker E a r n i n g s I n d u s t r i e s i n f l u e n c e the d i s t r i b u t i o n of income w i t h i n urban p o p u l a t i o n s i n p a r t t h rough employee e a r n i n g s . D i f f e r e n c e s between i n d u s t r i e s i n g e n e r a t i n g employee e a r n i n g s o c c u r as a r e s u l t of d i f f e r e n c e s i n o c c u p a t i o n a l demand ( p r o f e s s i o n a l , t e c h n i c a l and m a n a g e r i a l j o b s g e n e r a t e h i g h e r e a r n i n g s than c l e r i c a l and s a l e s j o b s ) , and d i f f e r e n c e s between i n d u s t r i e s i n the wages p a i d t o each o c c u p a t i o n . Stanback e t a l . (1981 p.67-71) use average o c c u p a t i o n a l wage r a n k s t o e v a l u a t e d i f f e r e n c e s between i n d u s t r i e s i n g e n e r a t i n g worker e a r n i n g s . T h i s approach r e q u i r e s d a t a on t h e average e a r n i n g s i n each o c c u p a t i o n i n each i n d u s t r y and t h i s i n f o r m a t i o n i s not a v a i l a b l e . B a x t e r and D a v i s (1974) use the o v e r a l l average 80 e a r n i n g s of a l l workers t o make comparisons between i n d u s t r i e s . T h i s approach i s used i n t h i s t h e s i s because of the a v a i l a b i l i t y of d a t a a t the m e t r o p o l i t a n l e v e l ( S t a t i s t i c s Canada 1988, Employment, e a r n i n g s and hours ). In a d d i t i o n , average weekly e a r n i n g s d a t a p r o v i d e s i n s i g h t i n t o d i f f e r e n c e s between i n d u s t r i e s i n p a r t - t i m e employment which g e n e r a t e s lower weekly e a r n i n g s than f u l l - t i m e employment. An i n d u s t r y w i t h a h i g h e r l e v e l of average employee e a r n i n g s i s more p r o p u l s i v e than an i n d u s t r y w i t h lower average worker e a r n i n g s ( a l l o t h e r p r o p u l s i v e c h a r a c t e r i s t i c s h e l d e q u a l ) . Average e a r n i n g s d a t a p r o v i d e s a l i m i t e d b a s i s f o r i d e n t i f y i n g d i f f e r e n c e s between i n d u s t r i e s i n d i s t r i b u t i n g l o c a l income and employment. Average wage s t a t i s t i c s do not i n d i c a t e the e x t e n t t o which employment i n an i n d u s t r y i s c o n c e n t r a t e d i n h i g h or low wage j o b s or v a r i a t i o n s i n term or s e a s o n a l employment. I t i s t h e r e f o r e n e c e s s a r y t o l o o k beyond average wage s t a t i s t i c s t o the d i s t r i b u t i o n of workers among e a r n i n g s c a t e g o r i e s t o g a i n a c l e a r e r u n d e r s t a n d i n g of the d i f f e r e n c e s between i n d u s t r i e s i n d i s t r i b u t i n g l o c a l income and employment. 3.2.4 Employment E a r n i n g s P r o f i l e An employment e a r n i n g s p r o f i l e i s a measure of the d i s t r i b u t i o n of employment i n an i n d u s t r y among h i g h , moderate and low wage j o b s . T h i s measure i s taken from Sassen-Koob (1984 p.153), Stanback et a l . (1981 p.70-71) and Stanback (1979 p.45-48). Three a r b i t r a r y e a r n i n g s c a t e g o r i e s a re proposed i n o r d e r t o f a c i l i t a t e c omparisons of employment e a r n i n g s p r o f i l e s between i n d u s t r i e s . H i g h wage j o b s earn more than $24,000 per 81 y e a r , moderate wage j o b s earn between $12,000 and $24,000 per year and low wage j o b s e a r n l e s s than $12,000 per y e a r . Low wage job s i n c l u d e p a r t - t i m e workers as w e l l as f u l l - t i m e workers e a r n i n g low h o u r l y wages. Data on the d i s t r i b u t i o n of employment among the t h r e e e a r n i n g s c a t e g o r i e s i s r e q u i r e d i n o r d e r t o e v a l u a t e d i f f e r e n c e s i n employment e a r n i n g s p r o f i l e s between i n d u s t r i e s . C o l l e c t e d over a number of y e a r s , t h i s d a t a p r o v i d e s i n s i g h t i n t o changes i n employment c o n c e n t r a t i o n among h i g h , moderate and low wage j o b s . D i f f e r e n c e s i n employment e a r n i n g s p r o f i l e s a r e e v a l u a t e d i n terms of the c o n c e n t r a t i o n of employment i n h i g h , moderate and low wage j o b s . From a d i s t r i b u t i v e p e r s p e c t i v e , an i n d u s t r y w i t h a h i g h c o n c e n t r a t i o n of employment i n h i g h and medium wage j o b s i s more p r o p u l s i v e than an i n d u s t r y w i t h p r e d o m i n a n t l y low wage j o b s . The d i s t r i b u t i o n of employment i n both h i g h and low wage job s i s a l s o an i m p o r t a n t c o n s i d e r a t i o n i n e v a l u a t i n g d i f f e r e n c e s between i n d u s t r i e s i n employment e a r n i n g s p r o f i l e s . I n d u s t r i e s w i t h t w o - t i e r e d l a b o u r s t r u c t u r e s a r e i n e q u i t a b l e because of the l i m i t e d o p p o r t u n i t i e s f o r u n s k i l l e d , low-wage workers t o advance i n t o h i g h e r s k i l l , h i g h e r wage j o b s ( D a v i s and Hutton 1981 p.17). T h e r e f o r e , i n d u s t r i e s w i t h employment c o n c e n t r a t e d i n both h i g h wage and low wage j o b s a r e l e s s p r o p u l s i v e than i n d u s t r i e s w i t h a more e q u i t a b l e d i s t r i b u t i o n of employment among h i g h , moderate and low wage j o b s . I n d u s t r i e s can a l s o be compared on the b a s i s of changes i n e a r n i n g s p r o f i l e s over time (1981-1986). An i n d u s t r y c r e a t i n g p r e d o m i n a n t l y h i g h wage j o b s i s more p r o p u l s i v e than an i n d u s t r y 82 c r e a t i n g moderate or low wage j o b s . I n d u s t r i e s e x h i b i t i n g an i n c r e a s i n g t r e n d towards a t w o - t i e r e d l a b o u r s t r u c t u r e a r e l e s s p r o p u l s i v e than i n d u s t r i e s w i t h employment growth more e v e n l y d i s t r i b u t e d a c r o s s h i g h , moderate and low wage j o b s . 3.2.5 Match Of O c c u p a t i o n a l Demand Wi t h L o c a l Unemployment Long term s t r u c t u r a l unemployment among m a n u f a c t u r i n g workers i s a s i g n i f i c a n t outcome of contemporary changes i n i n d u s t r i a l p r o d u c t i o n . Sweet (1969) and the C i t y of Vancouver (I985bc) e x p r e s s i n t e r e s t i n e v a l u a t i n g the d i f f e r e n c e s between i n d u s t r i e s i n g e n e r a t i n g employment f o r l o c a l unemployed w o r k e r s . T h i s c r i t e r i o n would r e q u i r e d a t a on o c c u p a t i o n a l demand i n each i n d u s t r y and the o c c u p a t i o n a l s u p p l y of l o c a l unemployed w o r k e r s . At p r e s e n t , no measures e x i s t f o r making comparisons i n the match of o c c u p a t i o n a l demand w i t h l o c a l unemployment a t the i n d u s t r y l e v e l . Economic r e s e a r c h e r s e s t i m a t e the r e l a t i o n s h i p s between o v e r a l l o c c u p a t i o n a l v a c a n c i e s and o c c u p a t i o n a l unemployment a t the n a t i o n a l (Economic C o u n c i l Canada 1976, 1982) and m e t r o p o l i t a n l e v e l (Employment and I m m i g r a t i o n Canada, monthly, •Labour Market  Survey ). T h e r e f o r e , the match between o c c u p a t i o n a l demand and l o c a l unemployment cannot be used as a c r i t e r i o n f o r i d e n t i f y i n g p r o p u l s i v e i n d u s t r i e s i n advanced m e t r o p o l i t a n economies a t t h i s t i m e . 83 3.2.6 M u l t i p l i e r Performance Input and output l i n k a g e s a c t as t r a n s m i t t e r s of growth impulses between i n d u s t r i e s i n an urban economy. A change i n f i n a l demand i n one i n d u s t r y t r i g g e r s o f f a s e r i e s of rounds of p u r c hases and s a l e s i n d i r e c t l y and i n d i r e c t l y l i n k e d i n d u s t r i e s . The c a p a c i t y of i n d u s t r i e s t o s t i m u l a t e urban economic growth through i n t e r - i n d u s t r y l i n k a g e s i s measured u s i n g i n p u t - o u t p u t a n a l y s i s ( D a v i s 1972; E r i c k s o n 1974; Lever 1980). I n p u t - o u t p u t a n a l y s i s measures the s a l e s and p u r c h a s e s between i n d u s t r i e s and c a l c u l a t e s m u l t i p l i e r s which e s t i m a t e the o v e r a l l change i n urban economic a c t i v i t y r e s u l t i n g from a change i n p r o d u c t i o n i n one i n d u s t r y . I n p u t - o u t p u t m u l t i p l i e r s a r e e x p r e s s e d i n terms of income and employment (D a v i s 1972; E r i c k s o n 1974). The h i g h e r the m u l t i p l i e r , the more p r o p u l s i v e the i n d u s t r y ( o t h e r c h a r a c t e r i s t i c s h e l d e q u a l ) . A t y p i c a l income m u l t i p l i e r might be, say, 1.28 which means t h a t each d o l l a r i n c r e a s e i n income i n a p a r t i c u l a r i n d u s t r y g e n e r a t e s an a d d i t i o n a l 28 c e n t s i n income growth i n the l o c a l economy. Employment m u l t i p l i e r s a r e e x p r e s s e d as the t o t a l i n c r e a s e i n o v e r a l l employment based on a a s p e c i f i c amount of i n c r e a s e i n the v a l u e of f i n a l demand ( f o r example, $1 m i l l i o n ) i n one i n d u s t r y ( D a v i s 1972 p.27). Employment m u l t i p l i e r s e s t i m a t e t o t a l employment growth i n man-hours w i t h o u t d i s t i n g u i s h i n g the v a r i a b l e p r o p u l s i v e e f f e c t s of f u l l - t i m e , p a r t - t i m e or s e a s o n a l employment or wage d i f f e r e n c e s between i n d u s t r i e s . For a more d e t a i l e d d i s c u s s i o n of i n p u t -o u tput a n a l y s i s , r e f e r t o D a v i s (1972). 84 The assumptions of i n p u t - o u t p u t a n a l y s i s l i m i t m u l t i p l i e r s t o measuring the impacts of a change i n an i n d u s t r y ' s p r o d u c t i o n l e v e l on urban income and employment at one p o i n t i n t i m e . A c r i t i c a l a ssumption of I/O i s t h a t the p r o p o r t i o n s and c o s t s of i n p u t s r e q u i r e d t o produce a u n i t of output do not change over time ( D a v i s 1972 p.28). T h i s assumption l i m i t s i n p u t - o u t p u t m u l t i p l i e r s t o s h o r t - r u n i n s i g h t s on i n d u s t r y p r o p u l s i v e n e s s because t e c h n o l o g i c a l i n n o v a t i o n i n e v i t a b l y a l t e r s the k i n d s , p r o p o r t i o n s and c o s t s of p r o d u c t i o n i n p u t s and the number and s i z e of f i r m s i n each i n d u s t r y . The use of s t a t i c i n p u t p r o p o r t i o n s and p r i c e s a l s o r u l e s out the p o t e n t i a l r o l e of i n t e r n a l and e x t e r n a l economies of s c a l e and assumes e x c e s s c a p a c i t y i n the s t o c k of l o c a l i n p u t s such as raw m a t e r i a l s , l a b o u r and c a p i t a l . In a study of the s t a b i l i t y of i n t e r -i n d u s t r y l i n k a g e s i n Washington S t a t e (1963-1967), Beyers (1972 p.372) observed s u b s t a n t i a l d i f f e r e n c e s between a c t u a l 1967 i n p u t - o u t p u t t r a n s a c t i o n s and t h o s e p r e d i c t e d u s i n g 1963 d a t a . There a r e a l s o p r a c t i c a l l i m i t a t i o n s a s s o c i a t e d w i t h u s i n g i n p u t - o u t p u t a n a l y s i s t o measure i n t e r - i n d u s t r y l i n k a g e s . C o m p i l i n g a comprehensive l i s t of the p u r chases and s a l e s of a l l i n d u s t r i e s i n an urban economy i s a f o r m i d a b l e c h a l l e n g e ( D a v i s 1972 p.29). P e r f o r m i n g an i n p u t - o u t p u t a n a l y s i s r e q u i r e s computing f a c i l i t i e s and t e c h n i c a l t r a i n i n g . I n p u t - o u t p u t m u l t i p l i e r s a r e f r e q u e n t l y o u t d a t e d because of the h i g h c o s t s of u p d a t i n g the data-base on i n t e r - i n d u s t r y t r a n s a c t i o n s . For example, i n Canada, i n p u t - o u t p u t m u l t i p l i e r s a t the n a t i o n a l l e v e l a r e a v a i l a b l e up t o 1981 ( S t a t i s t i c s Canada 1985). G i v e n 85 the recent p a t t e r n s of s t r u c t u r a l and c y c l i c a l change experienced by urban economies, input-output m u l t i p l i e r s which are more than a year or two out of date are of l i m i t e d use i n i d e n t i f y i n g p r o p u l s i v e i n d u s t r i e s . 3.2.7 Innovation I n t e n s i t y Product and p r o d u c t i o n process i n n o v a t i o n s p l a y an important r o l e i n m a i n t a i n i n g i n d u s t r y competitiveness and p r o v i d i n g new growth o p p o r t u n i t i e s . I d e n t i f y i n g and measuring t e c h n o l o g i c a l i n n o v a t i o n i s a c h a l l e n g e which has yet to be adequately r e s o l v e d by economic reseachers. Research and development i n t e n s i t y i s the most p r e v a l e n t measure of the s t r e n g t h of t e c h n o l o g i c a l i n n o v a t i o n w i t h i n i n d u s t r i e s and f i r m s , and i s d e f i n e d as the r a t i o of expenditures on p r o d u c t / p r o d u c t i o n process r e s e a r c h and development to t o t a l s a l e s ( M a n s f i e l d 1968b p.11; Steed 1982; B r i t t o n and Gilmour 1978; Malecki 1984; Freeman 1982; Rothwell and Zegveld 1985; Thomas 1985; B r i t t o n 1985). Economic r e s e a r c h e r s have observed a s t r o n g p o s i t i v e r e l a t i o n s h i p between R & D i n t e n s i t y and i n d u s t r y growth. In h i g h technology i n d u s t r i e s R & D inputs are much more important to the s u c c e s s f u l o p e r a t i o n of t h e i r c o n s t i t u e n t firms than i s the the case f o r f i r m s i n other manufacturing i n d u s t r i e s . R & D a c t i v i t i e s and expenditures seem to be d i r e c t l y , p o s i t i v e l y and s t r o n g l y r e l a t e d to i n n o v a t i o n , output growth and p r o d u c t i v i t y i n c r e a s e at the i n d u s t r y and f i r m l e v e l s (Thomas 1985 p.22). The p o s i t i v e r e l a t i o n s h i p between R & D i n t e n s i t y and growth suggests that an i n d u s t r y with a higher R & D i n t e n s i t y i s more p r o p u l s i v e than an i n d u s t r y with a lower R & D i n t e n s i t y . 86 At b e s t , R & D i n t e n s i t y i s a rough and b a s i c measure of t e c h n o l o g i c a l i n n o v a t i o n ( M a n s f i e l d 1968a p.34) w i t h s i g n i f i c a n t l i m i t a t i o n s when used t o i d e n t i f y p r o p u l s i v e i n d u s t r i e s i n advanced m e t r o p o l i t a n economies. R & D i n t e n s i t y c o n c e n t r a t e s on the c a p a c i t y of m a n u f a c t u r i n g i n d u s t r i e s f o r new p r o d u c t development ( B r i t t o n 1985 p.74, Economic C o u n c i l of Canada 1987b p . 9 ) . Many i n d u s t r i e s undertake new p r o d u c t and p r o d u c t i o n p r o c e s s i n n o v a t i o n by p u r c h a s i n g and a d a p t i n g t e c h n o l o g y r a t h e r than t h r o u g h in-house development (Economic C o u n c i l of Canada 1987b p.9; B i r c h and MacCraken 1984). P r o d u c t and p r o c e s s i n n o v a t i o n s i n s e r v i c e s w i t h the e x c e p t i o n of computer s o f t w a r e cannot be measured u s i n g R & D i n t e n s i t y and may n o n e t h e l e s s s i g n i f i c a n t l y i n f l u e n c e i n d u s t r y growth. For example, " i n s t a l l m e n t s e l l i n g may have had a g r e a t e r impact on economies and markets than most of the g r e a t advances i n t e c h n o l o g y i n t h i s c e n t u r y " (Vesper 1983 p.1 9 ) . At p r e s e n t , t h e r e a r e no s a t i s f a c t o r y measures or c r i t e r i a f o r e v a l u a t i n g d i f f e r e n c e s i n i n n o v a t i o n i n t e n s i t y between m a n u f a c t u r i n g and s e r v i c e i n d u s t r i e s i n urban economies. P r o d u c t and p r o d u c t i o n p r o c e s s i n n o v a t i o n i s a complex p r o c e s s i n v o l v i n g d i f f e r e n t n o n - r o u t i n e p r o d u c t i o n a c t i v i t i e s i n d i f f e r e n t i n d u s t r i e s and w i t h i n each i n d u s t r y a t d i f f e r e n t t i m e s (Freeman 1982). F o r m u l a t i n g a comprehensive measure of t e c h n o l o g i c a l i n n o v a t i o n remains a s i g n i f i c a n t c h a l l e n g e f o r economic r e s e a r c h e r s . An a l t e r n a t i v e measure of t e c h n o l o g i c a l i n n o v a t i o n i s proposed by B i r c h and MacCraken (1984 p.8-9). B i r c h and 87 MacCraken reject the use of input-oriented measures of technological innovation (such as R & D intensity) in favour of performance oriented measures: "the best measure of innovation is the evidence of doing i t , not preparing for i t . " Industry growth is proposed as an indirect measure of technological innovation. ...companies that are innovating, regardless of how they do i t or what they employ to do i t , should be able to identify unmet market needs, create new products or services to meet those needs, and expand rapidly to do so. Industries that contain large numbers of companies that are growing rapidly are said to be highly innovative (Birch and MacCraken 1984 p.9) . In order to make comparisons between the growth performance of different sized firms Birch and MacCraken (1984) propose an index which incorporates both net and percent employment growth data. Using an index value of 100, a firm which has a net employment growth of 50 jobs and a 200% employment growth rate (50 * 2.0) is equivalent to a firm with a net employment growth of 400 employees and a 25% employment growth rate (400 * .25) over the same time period. The higher the percentage of firms in an industry with an index value greater than 100, the more innovative the industry (Birch and MacCraken 1984 p.8-9). The growth index proposed by Birch and MacCraken (1984) is similar to the criterion of growth performance previously discussed and does not contribute significant new insights for identifying propulsive industries in advanced metropolitan economies. Without quantitative measures and guidelines which address the non-routine production activities making up technological innovation, urban economic researchers will be 88 unable to use innov a t i o n i n t e n s i t y as a c r i t e r i o n f o r i d e n t i f y i n g p r o p u l s i v e i n d u s t r i e s . 3.2.8 Export O r i e n t a t i o n Export markets provide a c r i t i c a l source of growth f o r Canadian i n d u s t r i e s . The a b i l i t y to enter, maintain and expand export markets i s an important i n d i c a t o r of competitiveness and i n d u s t r y v i a b i l i t y over the short to medium term. The a b i l i t y to maintain and expand export s a l e s i s p a r t i c u l a r l y important i n view of the growing c o m p e t i t i o n i n i n t e r n a t i o n a l markets. D i f f e r e n c e s i n export s a l e s performance between i n d u s t r i e s can be measured using export o r i e n t a t i o n - the r a t i o of export s a l e s to t o t a l i n d u s t r y s a l e s (DRIE 1987 p.6). Changes i n annual export o r i e n t a t i o n (1980-1986) provide i n s i g h t i n t o the a b i l i t y of each i n d u s t r y to enter, maintain and i n c r e a s e export s a l e s . An i n d u s t r y with an i n c r e a s i n g export o r i e n t a t i o n (1980-86) has b e t t e r short to medium term growth p r o s p e c t s than an i n d u s t r y with a s t a b l e or d e c l i n i n g export o r i e n t a t i o n r a t i o . Using a r a t i o of exports to t o t a l s a l e s a f f o r d s an o p p o r t u n i t y to make comparisons between i n d u s t r i e s with d i f f e r e n t s a l e s volumes i n terms of the a b i l i t y to maintain or expand e x p o r t s . T h i s measure i s p r e f e r a b l e to export s a l e s data alone because a r e l a t i v e l y small net or percent change i n export s a l e s i n a l a r g e i n d u s t r y may appear more s i g n i f i c a n t than a b i g i n c r e a s e i n export s a l e s f o r a sma l l e r i n d u s t r y . T h i s r a t i o can however generate m i s l e a d i n g i n d i c a t o r s of changes i n the export o r i e n t a t i o n of an i n d u s t r y . An i n d u s t r y with constant export s a l e s , and i n c r e a s i n g domestic s a l e s w i l l e x h i b i t a d e c l i n i n g 89 e x p o r t o r i e n t a t i o n r a t i o . Urban economic r e s e a r c h e r s need t o be s e n s i t i v e t o changes i n domestic as w e l l as i n t e r n a t i o n a l markets when u s i n g an e x p o r t o r i e n t a t i o n r a t i o as a c r i t e r i o n f o r i d e n t i f y i n g l o c a l p r o p u l s i v e i n d u s t r i e s . An i n d u s t r y w i t h an e x p o r t o r i e n t a t i o n r a t i o which d e c l i n e s due t o a l o s s i n e x p o r t s a l e s has weaker s h o r t t o medium term growth p r o p e c t s than an i n d u s t r y w i t h s t a b l e e x p o r t s a l e s (and i n c r e a s i n g domestic s a l e s ) . 3.2.9 V u l n e r a b i l i t y To Import P e n e t r a t i o n Of Domestic Markets The growth p o t e n t i a l of l o c a l i n d u s t r i e s i s a l s o dependent on the degree of v u l n e r a b i l i t y t o import p e n e t r a t i o n of domestic markets. Import p e n e t r a t i o n of d o m e s t i c markets i s measured at the n a t i o n a l l e v e l by the r a t i o of import s a l e s t o the t o t a l Canadian market f o r a good or s e r v i c e (DRIE 1986 p . 6 ) . T h i s r a t i o i n d i c a t e s the market share of i m p o r t s f o r each i n d u s t r y i n Canada. I n d u s t r y v u l n e r a b i l i t y t o import p e n e t r a t i o n of domestic markets can be measured by changes i n the market share of i m p o r t s over time (1980-1986). An i n c r e a s e i n the domestic market share of i m p o r t s between 1980-1986 i s an i n d i c a t o r of i n c r e a s i n g v u l n e r a b i l i t y t o import p e n e t r a t i o n and d e c l i n i n g growth p r o s p e c t s over the s h o r t t o medium term. A l t e r n a t i v e l y , a l o s s of domestic market share by i m p o r t s would i n d i c a t e t h a t a domestic i n d u s t r y i s i n c r e a s i n g l y a b l e t o compete w i t h f o r e i g n p r o d u c e r s and has s t r o n g e r growth p r o s p e c t s . D e c l i n e s i n domestic p r o d u c t i o n a s s o c i a t e d w i t h import p e n e t r a t i o n a r e u n l i k e l y t o be s p r e a d homogeneously over the Canadian economy. I t i s much more l i k e l y t h a t t h e e f f e c t s of 90 import p e n e t r a t i o n w i l l v a r y s i g n i f i c a n t l y between domestic p r o d u c e r s and l o c a t i o n s of p r o d u c t i o n . M e a s u r i n g i n d u s t r y v u l n e r a b i l i t y t o import p e n e t r a t i o n a t the urban l e v e l r e q u i r e s a f u r t h e r d i s a g g r e g a t i o n of market share d a t a . I t r e q u i r e s a measurement of the amount of t o t a l domestic s a l e s f o r a good or s e r v i c e a c c o u n t e d f o r by l o c a l p r o d u c e r s . The v u l n e r a b i l i t y of l o c a l i n d u s t r i e s t o import p e n e t r a t i o n of d o m e s t i c markets can be measured by changes i n the r a t i o of import market share t o the domestic market share of l o c a l p r o d u c e r s . A change i n t h i s r a t i o i n d i c a t e s t h a t a l o c a l i n d u s t r y i s l o s i n g or g a i n i n g market share t o p r o d u c e r s i n o t h e r Canadian c i t i e s or t o i m p o r t s . 3.2.10 S e n s i t i v i t y To The B u s i n e s s C y c l e P e r c e n t changes i n employment between p e r i o d s of economic r e c e s s i o n and e x p a n s i o n can be used as i n d i c a t o r s of i n d u s t r y s e n s i t i v i t y t o the b u s i n e s s c y c l e i n the absence of data on the income e l a s t i c i t y of demand f o r i n d u s t r i e s . The u t i l i t y of u s i n g employment changes i s demonstrated by Browne (1978) and Syron (1978) i n s e p a r a t e a n a l y s e s of the r e l a t i o n s h i p between i n d u s t r y mix and r e g i o n a l s e n s i t i v i t y t o the b u s i n e s s c y c l e i n the U n i t e d S t a t e s (see a l s o the Economic C o u n c i l Canada 1983 p.40-41). I n d u s t r i e s e x h i b i t d i f f e r e n t r e sponses t o t h e upswings and downswings of the b u s i n e s s c y c l e (Bergman and G o l d s t e i n 1983 p.269). For t h i s r e a s o n , two c r i t e r i a a r e proposed f o r e v a l u a t i n g the response of i n d u s t r i e s t o the b u s i n e s s c y c l e : s e n s i t i v i t y t o economic r e c e s s i o n ; and s e n s i t i v i t y t o economic 91 e x p a n s i o n . The most r e c e n t r e c e s s i o n i n Canada began i n 1981 and c o n t i n u e d t h rough 1983 (Dept. F i n a n c e 1984 p.9-10; Economic C o u n c i l Canada 1983 p.40-41). S i n c e 1984, the Canadian economy has e x p e r i e n c e d a p e r i o d of economic e x p a n s i o n . D i f f e r e n c e s between l o c a l i n d u s t r i e s i n s e n s i t i v i t y t o economic r e c e s s i o n a r e i n d i c a t e d by the p e r c e n t change i n employment between 1981-1984. An i n d u s t r y w i t h a h i g h p e r c e n t employment l o s s (1981-84) i s l e s s p r o p u l s i v e than an i n d u s t r y w i t h a lower p e r c e n t employment l o s s over the same p e r i o d . L o c a l i n d u s t r i e s w i t h h i g h p e r c e n t employment l o s s e s d u r i n g the 1981-84 r e c e s s i o n a r e more l i k e l y t o e x p e r i e n c e h i g h employment l o s s e s i n f u t u r e r e c e s s i o n s than i n d u s t r i e s w i t h s t a b l e or i n c r e a s i n g employment (1981-84). I n d u s t r y s e n s i t i v i t y t o economic e x p a n s i o n i s i n d i c a t e d by the p e r c e n t employment change between 1984-1986. I n d u s t r i e s which e x h i b i t s t r o n g p e r c e n t employment growth d u r i n g an economic r e c o v e r y a r e more p r o p u l s i v e than i n d u s t r i e s w i t h r e l a t i v e l y weaker p e r c e n t employment growth. L o c a l i n d u s t r i e s w i t h s t r o n g employment growth d u r i n g the 1984-86 r e c o v e r y a r e more l i k e l y t o e x h i b i t s t r o n g employment growth i n f u t u r e r e c o v e r i e s than . i n d u s t r i e s w i t h r e l a t i v e l y weaker employment growth r a t e s over the 1984-86 p e r i o d . 3.2.11 I n d u s t r y C o n c e n t r a t i o n M e a s u r i n g i n d u s t r y c o n c e n t r a t i o n p r o v i d e s i n s i g h t i n t o the d i f f e r e n c e s between i n d u s t r i e s i n the e x t e n t of o l i g o p o l y . C o n c e n t r a t i o n r a t i o s a r e the most f r e q u e n t l y used and w i d e l y c i t e d measures of i n d u s t r y c o n c e n t r a t i o n (Khemani 1985 p.136; 92 C u r r y and George 1983 p.207; B a l d w i n et a l . 1984 p . 1 ) . The a v a i l a b i l i t y of d a t a on f i r m s a l e s and s i z e c o n t i b u t e s t o the ease of c a l c u l a t i o n and the p o p u l a r i t y of u s i n g c o n c e n t r a t i o n r a t i o s t o i d e n t i f y market power w i t h i n i n d u s t r i e s . A c o n c e n t r a t i o n r a t i o measures the p e r c e n t a g e of i n d u s t r y s a l e s a c counted f o r by a s p e c i f i c number of the l a r g e s t f i r m s . O f t e n the c o n c e n t r a t i o n r a t i o i s c a l c u l a t e d f o r the f o u r or e i g h t l a r g e s t f i r m s i n an i n d u s t r y . An i n d u s t r y w i t h a h i g h e r c o n c e n t r a t i o n r a t i o has a g r e a t e r c a p a c i t y f o r d o m i n a t i n g l o c a l economic r e s o u r c e s ( c a p i t a l , l a b o u r ) and r a p i d r e s t r u c t u r i n g t h a n an i n d u s t r y w i t h a lower c o n c e n t r a t i o n r a t i o . There a r e two s i g n i f i c a n t c h a l l e n g e s i n measuring i n d u s t r y c o n c e n t r a t i o n . The f i r s t i s t o a c c u r a t e l y d e f i n e i n d u s t r i e s i n terms of p r o d u c t s and f i r m s . The second i s t o e s t a b l i s h g e o g r a p h i c b o u n d a r i e s f o r - i n d u s t r i e s (Greer 1984 p.103; B a l d w i n et a l . 1984 p . 2 ) . C u r r y and George (1983 p.214) o b s e r v e : ... c o n c e n t r a t i o n i n d i c e s a r e based on i n d u s t r y d a t a drawn from n a t i o n a l c e n s u s e s , w i t h i n d u s t r y b o u n d a r i e s d e f i n e d p r e d o m i n a n t l y by s u p p l y s i d e c h a r a c t e r i s t i c s . I n d u s t r i e s are d e f i n e d by a s s o c i a t i n g t o g e t h e r f i r m s which produce a p r o d u c t or group of p r o d u c t s u t i l i z i n g r e l a t e d raw m a t e r i a l s and/or p r o d u c t i o n p r o c e s s e s ( C u r r y and George 1983 p.214). T h i s r e p r e s e n t s a p r a g m a t i c a l t e r n a t i v e t o the d i f f i c u l t i e s of i d e n t i f y i n g i n d u s t r i e s i n terms of f i r m s which produce c l o s e p r o d u c t s u b s t i t u t e s (Khemani 1985 p.137; C u r r y and George 1983 p.214). A f i r m i s composed of one or more p l a n t s . For each p l a n t , the t o t a l o u t p u t i s a s s i g n e d t o the " i n d u s t r y whos p r i m a r y p r o d u c t (s) account f o r the l a r g e s t p r o p o r t i o n of 93 the p l a n t s t o t a l o u t p u t " ( B a l d w i n e t a l . 1984 p . 3 ) . More a c c u r a t e e s t i m a t e s of i n d u s t r y c o n c e n t r a t i o n c o u l d be a c h i e v e d by c l a s s i f y i n g p l a n t o u t p u t i n terms of p r i m a r y and secondary p r o d u c t s and a s s i g n i n g each t o the a p p r o p r i a t e i n d u s t r y ( B a l d w i n e t a l . 1984 p . 4 ) . I n d u s t r y c o n c e n t r a t i o n r a t i o s i n Canada a r e measured a t the n a t i o n a l l e v e l (Khemani 1985 p.137). I n t e r p r e t i n g n a t i o n a l l e v e l measures r e q u i r e s s e n s i t i v i t y t o two m e t h o d o l o g i c a l l i m i t a t i o n s . F i r s t , the Annual Census of M a n u f a c t u r e s ( S t a t i s t i c s Canada) i g n o r e s i m p o r t s and may t h e r e f o r e o v e r s t a t e i n d u s t r y c o n c e n t r a t i o n r a t i o s ( B a l d w i n e t a l . 1984 p.27). Second n a t i o n a l l e v e l measures of i n d u s t r y c o n c e n t r a t i o n may u n d e r s t a t e r e g i o n a l or urban c o n c e n t r a t i o n s because of the clumped s p a t i a l p a t t e r n of f i r m l o c a t i o n (Khemani 1985 p.137). Three f u r t h e r l i m i t a t i o n s of c o n c e n t r a t i o n r a t i o s a r e worth n o t i n g (Greer 1984 p.100-101; see a l s o S c h e r e r 1980). C o n c e n t r a t i o n r a t i o s d e s c r i b e the l e v e l of i n d u s t r y c o n c e n t r a t i o n f o r a s p e c i f i e d number of f i r m s r a t h e r than the e n t i r e i n d u s t r y . The r a t i o n a l e f o r c h o o s i n g 4, 8 or 12 f i r m s i n measuring i n d u s t r y c o n c e n t r a t i o n i s p o o r l y d e v e l o p e d (Sawyer 1985 p.28). C o n c e n t r a t i o n r a t i o s do not d e s c r i b e the d i s t r i b u t i o n of market power w i t h i n the s p e c i f i e d number of f i r m s . T h i s f a c t o r may r e p r e s e n t a major sou r c e of v a r i a t i o n between ' i n d u s t r i e s . F i n a l l y , measures of c o n c e n t r a t i o n do not r e f l e c t changes i n market power over t i m e . These l i m i t a t i o n s , c o u p l e d w i t h the c o n c e p t u a l u n c e r t a i n t i e s d i s c u s s e d i n c h a p t e r 2 suggest t h a t i n d u s t r y 94 c o n c e n t r a t i o n i s not a s u i t a b l e c r i t e r i o n f o r i d e n t i f y i n g p r o p u l s i v e i n d u s t r i e s a t the urban l e v e l . A n a l y z i n g the e f f e c t s of o l i g o p o l y on an i n d u s t r y ' s a b i l i t y t o p r o p e l urban economic growth and change remains an i m p o r t a n t r e s e a r c h i s s u e . C o n c e n t r a t i o n r a t i o s can p r o v i d e p r e l i m i n a r y e v i d e n c e i n d i c a t i n g i n d u s t r i e s w i t h a g r e a t e r p o t e n t i a l f o r d o m i n a t i n g l o c a l economic growth and change. These p r e l i m i n a r y o b s e r v a t i o n s need t o be f o l l o w e d up by an i n v e s t i g a t i o n of the r o l e of o l i g o p o l i s t i c i n d u s t r i e s i n d o m i n a t i n g l o c a l c a p i t a l and l a b o u r r e s o u r c e s . 3.3 U s i n g C r i t e r i a To I d e n t i f y P r o p u l s i v e I n d u s t r i e s I d e n t i f y i n g p r o p u l s i v e i n d u s t r i e s i n advanced m e t r o p o l i t a n economies r e q u i r e s the use of m u l t i p l e c r i t e r i a . The p r o p u l s i v e c h r a c t e r i s t i c s of l o c a l i n d u s t r i e s (based on the q u a n t i t a t i v e measures of each c r i t e r i o n ) can be d i s p l a y e d i n a m a t r i x ( c r i t e r i a by i n d u s t r i e s ) . M a t r i c e s a r e a commonly used a n a l y t i c a l t o o l i n p u b l i c p o l i c y r e s e a r c h ( H i c k l i n g 1975) and p r o v i d e a means f o r s c r e e n i n g , i n t e r - r e l a t i n g and communicating i n f o r m a t i o n t o p o l i c y m a k e r s and the p u b l i c ( C a r l e y 1980 p.126). Two d i f f e r e n t approaches have been taken by economic r e s e a r c h e r s i n u s i n g m u l t i p l e c r i t e r i a t o i d e n t i f y p r o p u l s i v e i n d u s t r i e s . One approach i s t o i d e n t i f y p r o p u l s i v e i n d u s t r i e s based on o v e r a l l performance a c r o s s a l l of the c r i t e r i a ( B a x t e r and D a v i s 1974 p.44). For each c r i t e r i o n ranks a r e a s s i g n e d t o i n d u s t r i e s on the b a s i s of p r o p u l s i v e performance and p o t e n t i a l from h i g h e s t t o l o w e s t . In t u r n , the ranks w i t h i n each i n d u s t r y can be summed or averaged t o d e t e r m i n e o v e r a l l p r o p u l s i v e n e s s . 95 The i n d u s t r i e s w i t h the l o w e s t t o t a l or average rank a re the most p r o p u l s i v e o v e r a l l . A s i g n i f i c a n t l i m i t a t i o n of t h i s approach i s t h a t i t doesn't i n d i c a t e the magnitude of the d i f f e r e n c e s i n p r o p u l s i v e performance between i n d u s t r i e s of d i f f e r e n t r a n k s . For example, the p r o p u l s i v e performance of the i n d u s t r i e s ranked second and t h i r d may be c o n s i d e r a b l y c l o s e r than the d i f f e r e n c e between the i n d u s t r i e s ranked t h i r d and f o u r t h . At b e s t , t h i s approach p r o v i d e s some p r e l i m i n a r y i n s i g h t s f o r i d e n t i f y i n g l o c a l p r o p u l s i v e , i n d u s t r i e s u s i n g a v a i l a b l e secondary d a t a . An a l t e r n a t i v e approach i s t o s e t p r i o r i t i e s among the c r i t e r i a and use each i n o r d e r of importance t o f i l t e r out the most p r o p u l s i v e i n d u s t r i e s (George 1983 p.31-33). T h i s approach may be p r e f e r a b l e t o l o c a l economic p o l i c y m a k e r s w i t h s p e c i f i c g o a l s and o b j e c t i v e s f o r pro m o t i n g economic growth. The o v e r a l l performance approach i s used i n t h i s t h e s i s i n the absence of e s t a b l i s h e d p r i o r i t i e s among c r i t e r i a . The use of e i t h e r approach w i l l i n e v i t a b l y l e a d t o t r a d e -o f f s i n i d e n t i f y i n g l o c a l p r o p u l s i v e i n d u s t r i e s . I t i s u n l i k e l y t h a t any i n d u s t r y w i l l e x h i b i t s u p e r i o r performance a c r o s s a l l of the c r i t e r i a . I n d u s t r i e s w i t h s t r o n g performance i n c r i t e r i a w h ich a re not a h i g h p r i o r i t y f o r l o c a l p o l i c y m a k e r s w i l l not be i d e n t i f i e d as p r o p u l s i v e . A c r i t i c a l advantage of d i s p l a y i n g d a t a on the p r o p u l s i v e c h a r a c t e r i s t i c s of i n d u s t r i e s i n a m a t r i x i s t h a t i t p r o v i d e s an o p p o r t u n i t y t o uncover and a n a l y z e the t r a d e - o f f s i n h e r e n t i n s e t t i n g p r i o r i t i e s among c r i t e r i a and i n i d e n t i f y i n g p r o p u l s i v e i n d u s t r i e s . 96 The t r a d e - o f f s i n s e l e c t i n g p r o p u l s i v e i n d u s t r i e s are evident i n the c r i t e r i a i n which each i n d u s t r y e x h i b i t s weak performance. For example, there are t r a d e - o f f s between s i z e and growth performance i n s e l e c t i n g e i t h e r l a r g e i n d u s t r i e s with poor employment growth over r e l a t i v e l y smaller i n d u s t r i e s with stronger employment growth (sunset versus s u n r i s e i n d u s t r i e s ) . Or the t r a d e - o f f s between i n d u s t r i e s which c r e a t e a smaller number of hig h wage jobs versus i n d u s t r i e s which c r e a t e a l a r g e r number of low-wage jobs . E v a l u a t i n g t r a d e - o f f s between i n d u s t r i e s on the b a s i s of d i f f e r e n c e s i n p r o p u l s i v e performance and p o t e n t i a l i s a c r i t i c a l element i n the i d e n t i f i c a t i o n of l o c a l p r o p u l s i v e i n d u s t r i e s by economic policymakers. Even t e c h n i c a l problems that may be s o l v e d with s t a n d a r d i z e d methods e x i s t i n the context of c o n f l i c t i n g i n t e r p r e t a t i o n s and i n t e r e s t s , e s t a b l i s h e d power, and excluded segments of the p o p u l a t i o n - a l l of which l i m i t the scope and a c c e p t a b i l i t y of p u r e l y t e c h n i c a l s o l u t i o n s ( F o r e s t e r 1982 p.67). 3.4 Co n c l u s i o n s C r i t e r i a f o r i d e n t i f y i n g p r o p u l s i v e i n d u s t r i e s i n advanced m e t r o p o l i t a n economies r e q u i r e both q u a n t i t a t i v e measures of p r o p u l s i v e c h a r a c t e r i s t i c s and g u i d e l i n e s f o r e v a l u a t i n g the observed d i f f e r e n c e s between i n d u s t r i e s i n terms of each p r o p u l s i v e c h a r a c t e r i s t i c . T h i s chapter has explored the o p p o r t u n i t i e s and l i m i t a t i o n s i n using e x i s t i n g q u a n t i t a t i v e measures and g u i d e l i n e s to tu r n p r o p u l s i v e c h a r a c t e r i s t i c s i n t o c r i t e r i a f o r i d e n t i f y i n g p r o p u l s i v e i n d u s t r i e s . Industry s i z e , growth and m u l t i p l i e r s which d e s c r i b e each i n d u s t r y ' s r o l e i n o v e r a l l urban income and employment growth 97 and change have t r a d i t i o n a l l y been the key i n d i c a t o r s of p r o p u l s i v e i n d u s t r i e s (Darwent 1975). Employment and income m u l t i p l i e r s d e r i v e d from i n p u t - o u t p u t a n a l y s i s p r o v i d e c r i t i c a l i n s i g h t i n t o the d i f f e r e n c e s between i n d u s t r i e s i n the t r a n s m i s s i o n of growth i m p u l s e s . The e f f i c a c y of t h i s c r i t e r i o n i s dependent upon the use of up t o date i n f o r m a t i o n on i n d u s t r y p u r c hases and s a l e s because of changes i n the n a t u r e of t e c h n i c a l l i n k a g e s which occur over time (Beyers 1972). Average worker e a r n i n g s and employment e a r n i n g s p r o f i l e s r e p r e s e n t an e x p a n s i o n of the c r i t e r i a t o i n c l u d e d i f f e r e n c e s between i n d u s t r i e s i n d i s t r i b u t i n g l o c a l income and employment. An i n d u s t r y w i t h h i g h e r average worker e a r n i n g s i s more p r o p u l s i v e than an i n d u s t r y w i t h lower average worker e a r n i n g s . M e a s u r i n g employment e a r n i n g s p r o f i l e s p e r m i t s an e v a l u a t i o n of the d i f f e r e n c e s between i n d u s t r i e s i n c r e a t i n g h i g h , moderate and low wage employment. T h i s i s p a r t i c u l a r l y i m p o r t a n t f o r i d e n t i f y i n g i n d u s t r i e s w i t h t w o - t i e r e d l a b o u r s t r u c t u r e s which c r e a t e i n e q u i t a b l e d i s t r i b u t i o n s of l o c a l income and employment. I d e n t i f y i n g p r o p u l s i v e i n d u s t r i e s i n terms of the match between o c c u p a t i o n a l demand and l o c a l unemployment cannot be a c c o m p l i s h e d w i t h e x i s t i n g q u a n t i t a t i v e measures. U s i n g t h i s c r i t e r i o n t o i d e n t i f y p r o p u l s i v e i n d u s t r i e s would r e q u i r e a measurement of the d i f f e r e n c e s between the o c c u p a t i o n a l demands of l o c a l i n d u s t r i e s and the o c c u p a t i o n a l s u p p l y of l o c a l unemployed w o r k e r s . E x i s t i n g q u a n t i t a t i v e measures make agg r e g a t e d comparisons of o c c u p a t i o n a l s u p p l y and demand a t the n a t i o n a l and m e t r o p o l i t a n l e v e l s . 98 Formulating c r i t e r i a which provide insight into the ways in which an industry's capacity to propel urban economic growth i s changing over time represents a substantial challenge. This chapter has discussed the opportunities for formulating c r i t e r i a for five economic factors which change the propulsive e f f e c t s of of an industry on an urban economy over the short to long run (technology intensity, export orientation, v u l n e r a b i l i t y to import penetration of domestic markets, s e n s i t i v i t y to the business cycle and industry concentration). It i s important to note that insights into propulsive potential pertain for the most part to industry growth and not to changes in m u l t i p l i e r s or the d i s t r i b u t i o n of income and employment over the short to long run. Quantitative measures of technological innovation have not progressed since the c r i t i c i s m s voiced by Mansfield (1968a p.34) concerning the use of R&D i n t e n s i t y . This is surprising given the amount of study in t h i s area and emphasis placed on innovation by private enterprise and economic development policymakers. R&D intensity i s a useful measure of technological innovation in manufacturing industries (Britton 1985). However, many industries generate new product and production process innovations by purchasing and adapting available technology without resorting to formalized research and development. There i s l i t t l e understanding of the nature of innovation in service industries. Comparisons of the strength of innovation in manufacturing and services requires the formulation of quantitative measures which address a broader 99 range of non-routine p r o d u c t i o n a c t i v i t i e s . In the absence of s a t i s f a c t o r y q u a n t i t a t i v e measures, i n n o v a t i o n i n t e n s i t y cannot be used as a c r i t e r i o n f o r i d e n t i f y i n g p r o p u l s i v e i n d u s t r i e s . Export o r i e n t a t i o n , v u l n e r a b i l i t y to import p e n e t r a t i o n of domestic markets and s e n s i t i v i t y to economic r e c e s s i o n and expansion provide i n s i g h t i n t o the d i f f e r e n c e s between i n d u s t r i e s i n growth p o t e n t i a l over the short to medium term. I n d u s t r i e s which experience growth i n export s a l e s and/or r e s i s t import p e n e t r a t i o n are more l i k e l y to continue growing than i n d u s t r i e s with weaker performance i n these two c h a r a c t e r i s t i c s of market o r i e n t a t i o n . I n d u s t r i e s which have not experienced l a r g e l o s s e s i n employment i n past r e c e s s i o n s are l e s s l i k e l y to experience major l o s s e s of employment duri n g the next r e c e s s i o n . P r e d i c t i n g changes in the p r o p u l s i v e c a p a b i l i t i e s of l o c a l i n d u s t r i e s over the long run remains a formidable r e s e a r c h c h a l l e n g e . T h i s i s due i n p a r t to the complexity and d i v e r s i t y of economic f o r c e s which i n f l u e n c e i n d u s t r i a l p r o d u c t i o n . I t a l s o h i g h l i g h t s the e x i s t i n g problems i n understanding the nature of economic f o r c e s which spur i n d u s t r y growth and change, and the c h a l l e n g e s of f o r m u l a t i n g c r i t e r i a which adequately d e s c r i b e dynamic c h a c t e r i s t i c s of i n d u s t r i e s . For example, i n d u s t r i e s which experience d e c l i n e s i n export s a l e s or l o s s of domestic market share to imports may respond with new and b e t t e r c o m p e t i t i v e s t r a t e g i e s i n v o l v i n g a c t i o n s such as product and p r i c e changes through t e c h n o l o g i c a l i n n o v a t i o n . The performance of i n d u s t r i e s with c h a r a c t e r i s t i c s i n d i c a t i v e of s i g n i f i c a n t p r o p u l s i v e p o t e n t i a l needs to be monitored over time to e v a l u a t e 100 the a c c u r a c y and r e l i a b i l i t y of the c r i t e r i a . W h i l e c o n c e n t r a t i o n r a t i o s a r e a u s e f u l i n d i c a t o r of o l i g o p o l y , the e x t e n t t o which an o l i g o p o l i s t i c i n d u s t r y w i l l dominate l o c a l economic r e s o u r c e s and t h r e a t e n the l o n g - r u n growth of an urban economy remains h i g h l y u n c e r t a i n . These u n c e r t a i n t i e s make i n d u s t r y c o n c e n t r a t i o n an u n s u i t a b l e c r i t e r i o n f o r i d e n t i f y i n g l o c a l p r o p u l s i v e i n d u s t r i e s a t t h i s t i m e . The i d e n t i f i c a t i o n of p r o p u l s i v e i n d u s t r i e s r e q u i r e s the use of m u l t i p l e c r i t e r i a . The d i s c u s s i o n of q u a n t i t a t i v e measures and g u i d e l i n e s i n t h i s c h a p t e r i n d i c a t e s t h a t many of the i n d u s t r y c h a r a c t e r i s t i c s a d d r e s s e d i n c h a p t e r 2 can be t u r n e d i n t o c r i t e r i a f o r i d e n t i f y i n g l o c a l p r o p u l s i v e i n d u s t r i e s . C r i t e r i a which can be used t o i d e n t i f y p r o p u l s i v e i n d u s t r i e s i n c l u d e s i z e , growth performance, average worker e a r n i n g s , employment e a r n i n g s p r o f i l e s , m u l t i p l i e r performance, e x p o r t o r i e n t a t i o n , v u l n e r a b i l i t y t o import p e n e t r a t i o n of domestic markets and s e n s i t i v i t y t o economic r e c e s s i o n and e x p a n s i o n . The l a c k of q u a n t i t a t i v e measures and/or g u i d e l i n e s f o r i n n o v a t i o n i n t e n s i t y , i n d u s t r y c o n c e n t r a t i o n and match of o c c u p a t i o n a l demand w i t h l o c a l unemployment makes the s e i n d u s t r y c h a r a c t e r i s t i c s u n s u i t a b l e f o r use as c r i t e r i a f o r i d e n t i f y i n g p r o p u l s i v e i n d u s t r i e s . They remain i m p o r t a n t i s s u e s f o r urban economic r e s e a r c h . Q u a n t i t a t i v e measures of the p r o p u l s i v e c h a r a c t e r i s t i c s of l o c a l i n d u s t r i e s can be d i s p l a y e d i n a m a t r i x ( i n d u s t r i e s by c r i t e r i a ) . L o c a l p r o p u l s i v e i n d u s t r i e s can be 101 i d e n t i f i e d by o v e r a l l performance a c r o s s a l l c r i t e r i a or by the s e q u e n t i a l use of c r i t e r i a i n o r d e r of p r i o r i t y . R e g a r d l e s s of the approach chosen, the m a t r i x p r o v i d e s l o c a l p o l i c y m a k e r s w i t h a v a l u a b l e t o o l f o r a n a l y z i n g the t r a d e - o f f s i n h e r e n t i n s e t t i n g p r i o r i t i e s among c r i t e r i a and i n the i d e n t i f i c a t i o n of l o c a l p r o p u l s i v e i n d u s t r i e s . Use of the c r i t e r i a proposed i n t h i s c h a p t e r t o i d e n t i f y l o c a l p r o p u l s i v e i n d u s t r i e s would s i g n i f i c a n t l y expand the d a t a c o l l e c t i o n and a n a l y s i s a c t i v i t i e s of urban economic p o l i c y m a k e r s . Many of the c r i t e r i a have s u b s t a n t i a l d a t a r e q u i r e m e n t s which seem l i k e l y t o impede the i d e n t i f i c a t i o n and m o n i t o r i n g of p r o p u l s i v e i n d u s t r i e s a t the m e t r o p o l i t a n l e v e l . The most n o t a b l e c r i t e r i a f o r d a t a r e q u i r e m e n t s i s i n p u t - o u t p u t m u l t i p l i e r s which r e q u i r e d e t a i l e d i n f o r m a t i o n on the pur c h a s e s and s a l e s t r a n s a c t i o n s between i n d u s t r i e s . In many c a s e s m u n i c i p a l l e v e l r e s e a r c h i n t o the n a t u r e of l o c a l p r o p u l s i v e i n d u s t r i e s w i l l r e q u i r e the support of s e n i o r l e v e l s of government i n u n d e r t a k i n g d a t a c o l l e c t i o n and a n a l y s i s . The e x t e n t t o which l o c a l economic p o l i c y m a k e r s can r e l y on e x i s t i n g d a t a f o r i d e n t i f y i n g p r o p u l s i v e i n d u s t r i e s i s d i s c u s s e d i n the next c h a p t e r . 102 IV. A SURVEY OF EXISTING DATA FOR IDENTIFYING PROPULSIVE  INDUSTRIES IN METROPOLITAN VANCOUVER, B.C. 4.1 I n t r o d u c t i o n Chapter 4 examines the o p p o r t u n i t i e s and l i m i t a t i o n s i n u s i n g e x i s t i n g d a t a t o i d e n t i f y p r o p u l s i v e i n d u s t r i e s i n m e t r o p o l i t a n Vancouver, B r i t i s h Columbia. A broad i n v e s t i g a t i o n of s t a t i s t i c s r e p o r t e d by l o c a l , r e g i o n a l , p r o v i n c i a l and f e d e r a l i n s t i t u t i o n s was used t o g a t h e r a v a i l a b l e d a t a f o r the c r i t e r i a proposed i n chaper 3. E x i s t i n g d a t a has t o meet two c o n d i t i o n s i n o r d e r t o q u a l i f y f o r use i n i d e n t i f y i n g p r o p u l s i v e i n d u s t r i e s i n Vancouver. The f i r s t c o n d i t i o n i n v o l v e s g e o g r a p h i c b o u n d a r i e s . Data f o r a p a r t i c u l a r c r i t e r i o n has t o measure i n d u s t r y a c t i v i t y w i t h i n the Vancouver Census M e t r o p o l i t a n Area r a t h e r than a t the m u n i c i p a l , p r o v i n c i a l or n a t i o n a l l e v e l . S e c o n d l y , e x i s t i n g d a t a has t o use a s t a n d a r d i z e d i n d u s t r i a l c l a s s i f i c a t i o n system t o ensure the c o m p a t a b i l i t y of da t a f o r d i f f e r e n t c r i t e r i a . An i d e a l s i t u a t i o n would e x i s t i f a l l a v a i l a b l e d a t a s o u r c e s used the major i n d u s t r y groups from the 1980 S t a n d a r d I n d u s t r i a l C l a s s i f i c a t i o n (SIC) ( S t a t i s t i c s Canada 1980). In p r a c t i c e , e x i s t i n g d a t a s o u r c e s make use of d i f f e r e n t mixes of i n d u s t r y d i v i s i o n s and major groups from the 1960, 1970 and 1980 SICs. T h i s r e q u i r e s the a g g r e g a t i n g of d a t a i n t o b r o a d e r i n d u s t r y groups or d i v i s i o n s u n t i l a s e t of i n d u s t r i e s common t o a l l e x i s t i n g d a t a i s e s t a b l i s h e d . The SIC ( S t a t i s t i c s Canada 1980 p.16-24) d e f i n e s an 103 i n d u s t r y as a group of e s t a b l i s h m e n t s whose p r o d u c t i o n r e p r e s e n t s a homogenous s e t of goods or s e r v i c e s , or a group of e s t a b l i s h m e n t s which a r e engaged p r i m a r i l y i n s i m i l a r k i n d s of a c t i v i t i e s . E s t a b l i s h m e n t s a r e c l a s s i f i e d i n t o i n d u s t r i e s by the group of p r o d u c t i o n a c t i v i t i e s which c o n t r i b u t e s the g r e a t e s t share t o t o t a l v a l u e - a d d e d . Secondary p r o d u c t i o n a c t i v i t i e s a r e c l a s s i f i e d i n t o the same i n d u s t r i a l c l a s s i f i c a t i o n as p r i m a r y p r o d u c t i o n a c t i v i t i e s . One l i m i t a t i o n of t h i s approach i s t h a t s e r v i c e a c t i v i t i e s w i t h i n m a n u f a c t u r i n g i n d u s t r i e s end up b e i n g c l a s s i f i e d as m a n u f a c t u r i n g . The f o l l o w i n g t o p i c s a r e a d d r e s s e d i n c h a p t e r 4. E x i s t i n g d a t a on p r o p u l s i v e i n d u s t r i e s i s examined i n s e c t i o n 4.2. S t a t i s t i c s a t the m e t r o p o l i t a n l e v e l a r e a v a i l a b l e f o r i n d u s t r y s i z e , growth performance, average weekly wages, and s e n s i t i v i t y t o economic r e c e s s i o n and e x p a n s i o n . T h i s s e c t i o n a l s o b r i e f l y n o t es d a t a s o u r c e s f o r o t h e r c r i t e r i a which cannot be used t o i d e n t i f y p r o p u l s i v e i n d u s t r i e s i n Vancouver because they a r e o u t d a t e d ( m u l t i p l i e r s ) , do not a d e q u a t e l y a d d r e s s s e r v i c e i n d u s t r i e s ( v a l u e - a d d e d , e x p o r t o r i e n t a t i o n , v u l n e r a b i l i t y t o i m p o r t s , c o n c e n t r a t i o n r a t i o s ) , or a r e a g g r e g a t e d a t the p r o v i n c i a l or n a t i o n a l l e v e l (R&D i n t e n s i t y , e x p o r t o r i e n t a t i o n , v u l n e r a b i l i t y t o i m p o r t s , employment e a r n i n g s p r o f i l e s ) . In s e c t i o n 4.3 e x i s t i n g d a t a on i n d u s t r y s i z e , growth performance, average weekly wages and s e n s i t i v i t y t o economic r e c e s s i o n and e x p a n s i o n a r e used t o make a p r o v i s i o n a l i d e n t i f i c a t i o n of p r o p u l s i v e i n d u s t r i e s i n m e t r o p o l i t a n Vancouver. 104 4.2 E x i s t i n g Data On P r o p u l s i v e I n d u s t r i e s In M e t r o p o l i t a n  Vancouver 4.2.1 I n d u s t r y S i z e Data on i n d u s t r y s i z e i n Vancouver are a v a i l a b l e f o r both employment and value-added measures. Annual average employment d a t a (1981-1986) i s based on the monthly l a b o u r f o r c e survey by S t a t i s t i c s Canada (1987) and i s l i s t e d i n T a b l e 3. I n d u s t r i e s w i t h annual average employment l e s s than 3.000 i n d i v i d u a l s a r e not r e p o r t e d because of the u n r e l i a b i l i t y of the survey i n e s t i m a t i n g t o t a l employment . i n s m a l l e r i n d u s t r i e s ( p e r s . com. O t t o Knauf CEIC 1987). Value-added d a t a i s a v a i l a b l e f o r m a n u f a c t u r i n g i n d u s t r i e s (1981-1984) and i s l i s t e d i n T a b l e 4. T h i s d a t a has l i m i t e d a p p l i c a t i o n s f o r i d e n t i f y i n g p r o p u l s i v e i n d u s t r i e s i n Vancouver because i t i s r e s t r i c t e d t o m a n u f a c t u r i n g i n d u s t r i e s and i s a v a i l a b l e o n l y up t o 1984 ( S t a t i s t i c s Canada I987a-June). The p r o v i n c e of B r i t i s h Columbia a l s o p u b l i s h e s value-added d a t a (1971-1984) (B.C. M i n i s t r y F i n . 1986 p.24); however, s e r v i c e i n d u s t r i e s a r e not d i s a g g r e g a t e d t o the l e v e l a v a i l a b l e i n employment d a t a . Because of t h e s e two l i m i t a t i o n s i n v a l u e -added d a t a , a n n u a l average employment (1986) i s used t o e v a l u a t e d i f f e r e n c e s between i n d u s t r i e s i n o v e r a l l s i z e . Vancouver i n d u s t r i e s ranked by 1986 employment from l a r g e s t t o s m a l l e s t a r e l i s t e d i n T a b l e 5. The s t r o n g s e r v i c e o r i e n t a t i o n of the Vancouver economy i s demonstrated by the f a c t t h a t the 10 l a r g e s t i n d u s t r i e s by employment i n 1986 a r e a l l 105 s e r v i c e s . Only two m a n u f a c t u r i n g i n d u s t r i e s had t o t a l employment i n 1986 g r e a t e r than 10000: wood p r o d u c t s (14700) and food and beverage (12500). 106 T a b l e 3 - Annual Average Employment i n Vancouver I n d u s t r i e s , 1981-1986 1986 1985 1 984 1983 1 982 1981 I n d u s t r i e s 000s 000s 000s 000s 000s 000s Food and Beverage 12 .5 1 1 . 7 14. 5 13. 7 12.9 14.5 Rubber and P l a s t i c s - 3. 1 - - - 3.2 L e a t h e r - - - - - -T e x t i l e s - - - - - -C l o t h i n g 3 .9 - - - - 4.1 Wood P r o d u c t s 14 .7 14. 3 10. 1 13. 2 14.2 18.6 F u r n i t u r e / F i x t u r e s - - - - - -P a p e r / A l l i e d P r o d . 3 .2 3. 5 4. 2 3. 9 5.0 6.0 P r i n t i n g / P u b l i s h i n g 8 .4 7. 9 6. 6 8. 0 7.9 6.7 P r i m a r y M e t a l s - 3. 6 3. 0 - 5.2 3.1 M e t a l F a b r i c a t i n g 7 .8 5. 8 6. 8 5. 6 8.8 9.4 Machinery 3 .0 3. 8 - 4. 1 4.7 4.1 T r a n s p o r t a t i o n E q u i p . 4 . 1 3. 6 - 4. 0 5.2 5.2 E l e c t r i c a l P r o d u c t s 3 .5 3. 4 4. 9 3. 0 5.0 3.3 Non-Metal. M i n. Pr o d . - - - - - -P e t r o l . / C o a l P r o d . - - - - - -Chemical P r o d u c t s - - - - - -Other M a n u f a c t u r i n g 4 .3 4. 1 3. 5 4. 2 3.5 3.1 G e n e r a l C o n t r a c t o r s 14 .5 12. 8 14. 9 14. 1 14.2 16.9 S p e c i a l Trade C o n t r . 20 .6 20. 0 19. 2 20. 8 22.5 23.6 S e r v i c e s I n c i d e n t a l t o C o n s t r u c t i o n - - - - - -T r a n s p o r t a t i o n 38 . 1 37. 6 34. 1 43. 0 41.8 49.5 S t o r a g e - - - - - -Communication 22 .8 20. 3 17. 3 19. 8 19.3 17.7 E l e c t r i c a l Power, Gas and Water 3 .7 6. 7 8. 8 7. 1 9.3 9.0 Wholesale Trade 44 .2 34. 5 39. 0 33. 8 37.0 45.1 R e t a i l Trade 86 .7 84. 8 75. 2 76. 9 82.6 82.2 F i n a n c e 27 .8 23. 4 26. 4 22. 1 25.0 24.0 I n s u r a n c e C a r r i e r s 8 .3 9. 1 8. 7 6. 8 8.1 7.3 Insu r a n c e A g e n c i e s and R e a l E s t a t e 19 .2 16. 4 15. 7 18. 4 15.3 16.4 B u s i n e s s S e r v i c e s 43 .2 44. 6 38. 1 36. 3 43.3 43.8 Accommod. and Food 48 .0 38. 5 39. 0 36. 3 36.3 34.2 E d u c a t i o n 40 . 1 40. 4 40. 1 43. 8 42.7 38.7 H e a l t h and S o c i a l 58 .8 55. 0 56. 9 55. 1 48.4 52.2 Amusement and R e c r . 14 .8 1 1 . 6 9. 3 10. 4 9.7 10.4 P e r s o n a l S e r v i c e s 17 .6 19. 0 15. 0 13. 6 11.6 11.7 Other S e r v i c e s 21 .5 18. 0 15. 7 13. 1 12.3 14.4 F e d e r a l Gov't. 14 .8 1 1 . 0 12. 0 10. 9 10.5 12.3 P r o v i n c i a l Gov't. 10 .8 9. 2 9. 4 10. 3 12.7 10.0 L o c a l Gov't. 13 .6 13. 8 14. 0 12. 8 13.2 • 14.4 Source: S t a t i s t i c s Canada, 1987. Labour F o r c e Survey. 107 T a b l e 4 - Value-Added i n Vancouver I n d u s t r i e s , 1981-1984 1984 1983 1982 1981 I n d u s t r i e s (1) (2) 000s 000s 000s 000s Food and Beverage 730746 691231 632715 588186 Rubber and P l a s t i c s 83051 79134 60147 54533 L e a t h e r 4687 - - -T e x t i l e s - - - 30816 P r i m a r y T e x t i l e s - 1 0902 - -T e x t i l e P r o d u c t s 24708 - - -C l o t h i n g 78177 72096 60147 67500 Wood P r o d u c t s 447454 531046 373440 486405 F u r n i t u r e / F i x t u r e s 46901 51 437 56660 65429 Pa p e r / A l l i e d P r o d . 187131 169009 169546 183285 P r i n t i n g and P u b l i s h . 264644 - 236055 236063 P r i m a r y M e t a l - - - -M e t a l F a b r i c a t i n g 336088 332889 335326 408940 Machinery 187140 152408 184798 221481 T r a n s p o r t a t i o n E q u i p . 223547 140135 176138 228952 E l e c t r i c a l P r o d u c t s 157982 117243 109154 112700 Non-Metal. M i n. Prod. 145551 135981 140129 166665 P e t r o l . / C o a l P r o d . - 335055 259560 176539 C h e m i c a l s / Chem. Pr o d . 162642 150598 130788 -Other M a n u f a c t u r i n g 82973 70996 73929 73263 TOTAL 3501782 3388827 3125030 3387717 (1) Source: S t a t i s t i c s Canada, ( A n n u a l ) . M a n u f a c t u r i n g  I n d u s t r i e s of Canada: s u b p r o v i n c i a l a r e a s . C a t . No. 31-209. Ottawa: Supply and S e r v i c e s Canada. T a b l e 3. (2) In 1983, the Census of Ma n u f a c t u r e s s h i f t e d from the 1970 t o the 1980 St a n d a r d I n d u s t r i a l C l a s s i f i c a t i o n (see a l s o S t a t i s t i c s 'Canada 1983 C a t . No. 31-203). 108 T a b l e 5 - Summary S t a t i s t i c s on I n d u s t r y S i z e by T o t a l Employment i n 1986 I n d u s t r i e s Rank Employment 1986 (000s) R e t a i l Trade 1 86.7 H e a l t h and S o c i a l 2 58.8 Accommodation and Food 3 48.0 W holesale Trade 4 44.2 B u s i n e s s S e r v i c e s 5 43.2 E d u c a t i o n 6 40. 1 T r a n s p o r t a t i o n 7 38. 1 F i n a n c e 8 27.8 Communication 9 22.8 Other S e r v i c e s 10 21.5 S p e c i a l Trade C o n t r . 1-1 20.6 I n s u r a n c e Ag. & R.E. 1 2 19.2 P e r s o n a l S e r v i c e s 13 17.6 F e d e r a l Government 14.5 14.8 Amuse, and Rec. 14.5 14.8 Wood P r o d u c t s 1 6 14.7 G e n e r a l C o n t r a c t o r s 17 14.5 L o c a l Gov't 18 13.6 Food and Bev. 19 12.5 P r o v . Gov't 20 10.8 P r i n t i n g and P u b l . 21 8.4 In s u r a n c e C a r r i e r s 22 8.3 M e t a l F a b r i c a t i n g 23 7.8 Other Manuf. 24 4.3 Transp. E q u i p . 25 4.1 C l o t h i n g 26 3.9 U t i l i t i e s 27 3.7 E l e c t i c a l P r o d u c t s 28 3.5 Paper and A l l i e d 29 3.2 Machinery 30 3.0 Rubber and P l a s t i c s 31 <3.0 L e a t h e r 31 T e x t i l e s 31 F u r n i t u r e s / F i x t u r e s 31 Non-Metal. M i n . Prod. 31 P e t r o l e u m / C o a l 31 C h e m i c a l P r o d u c t s 31 S e r v . I n c i d . C o n s t r . 31 S t o r a g e 31 P r i m a r y M e t a l s 31 109 4.2.2 I n d u s t r y Growth Performance Annual average employment d a t a (1981-1986) can a l s o be used t o measure the growth performance of l o c a l i n d u s t r i e s i n the Vancouver economy ( r e f e r t o T a b l e 6 ) . The t o p 10 l o c a l i n d u s t r i e s by net employment growth (1981-1986) a r e a l l s e r v i c e s w i t h accommodation and foo d f a r o u t p a c i n g o t h e r i n d u s t r i e s by c r e a t i n g 13,800 new j o b s . The s t r o n g growth performance of Accommodation and Food i s due i n p a r t t o Expo 86. 13 out of 20 s e r v i c e i n d u s t r i e s had net employment growth (1981-1986) g r e a t e r than or e q u a l t o the median (+800) f o r a l l i n d u s t r i e s v e r s u s 2 out of 10 m a n u f a c t u r i n g i n d u s t r i e s ( p r i n t i n g and p u b l i s h i n g , o t h e r m a n u f a c t u r i n g ) . Many l o c a l i n d u s t r i e s e x p e r i e n c e d d e c l i n e s i n employment between 1981 and 1986. Most n o t a b l y , t r a n s p o r t a t i o n e x p e r i e n c e d a net l o s s i n employment of 11400 w o r k e r s . 110 Table 6 - Employment Growth Performance i n Vancouver I n d u s t r i e s , 1981-1986 I n d u s t r y Rank Net Employ. Change 1981-1986 (000s) Accom. and Food 1 13.8 Other S e r v i c e s 2 7.1 H e a l t h and S o c i a l 3 6.6 P e r s o n a l S e r v i c e s 4 5.9 Communication 5 5.1 R e t a i l Trade 6 4.5 Amuse, and Rec. 7 4.4 F i n a n c e 8 3.8 I n s u r . Agents & R.E. 9 2.8 F e d e r a l Gov't 10 2.5 P r i n t i n g and P u b l . 1 1 1 .7 E d u c a t i o n 1 2 1 .4 Other M a n u f a c t u r i n g 1 3 1 .2 I n s u r a n c e C a r r i e r s 14 1 .0 Pro v . Gov't 1 5 0.8 E l e c t r i c a l P r o d u c t s 1 6 0.2 C l o t h i n g 1 7 -0.2 B u s i n e s s S e r v i c e s 18 -0.6 L o c a l Gov't 19 -0.8 Wholesale Trade 20 -0.9 Machinery 21.5 -1.1 T r a n s p o r t . E q u i p . 21.5 -1.1 M e t a l F a b r i c a t i n g 23 -1 .6 Food and Bev. 24 -2.0 G e n e r a l C o n t r a c t o r s 25 -2.4 Paper and A l l i e d 26 -2.8 Spec. T r . C o n t r . 27 -3.0 Wood P r o d u c t s 28 -3.9 U t i l i t i e s 29 -5.3 T r a n s p o r t a t i o n 30 -11.4 111 4.2.3 Average Worker E a r n i n g s S t a t i s t i c s Canada d a t a on a n n u a l average • weekly e a r n i n g s (1986) f o r i n d u s t r i e s i n m e t r o p o l i t a n Vancouver i s l i s t e d i n T a b l e 7. Average weekly e a r n i n g s i n c l u d e f u l l - t i m e , p a r t - t i m e , c a s u a l and temporary w o r k e r s . E a r n i n g s were not r e p o r t e d f o r rubber and p l a s t i c s , paper and a l l i e d p r o d u c t s , machinery and p r o v i n i c a l government s e r v i c e s . The o v e r a l l average f o r m a n u f a c t u r i n g i n d u s t r i e s was used as a p r o v i s i o n a l e s t i m a t e f o r the t h r e e m a n u f a c t u r i n g i n d u s t r i e s and the average e a r n i n g s f o r l o c a l and f e d e r a l government as a p r o v i s i o n a l e s t i m a t e f o r the p r o v i n c i a l government. F i l l i n g i n these d a t a gaps d i d not a f f e c t the o v e r a l l i d e n t i f i c a t i o n of p r o p u l s i v e i n d u s t r i e s and was done i n o r d e r t o i n c l u d e t h e s e i n d u s t r i e s i n the a n a l y s i s of l o c a l p r o p u l s i v e i n d u s t r i e s . M a n u f a c t u r i n g and s e r v i c e i n d u s t r i e s are d i s t r i b u t e d e v e n l y around the median average weekly wage ($522.00). 8 out of 15 m a n u f a c t u r i n g i n d u s t r i e s p a i d weekly wages g r e a t e r than or e q u a l t o the median, i n comparison t o 9 out of 19 s e r v i c e i n d u s t r i e s . S e r v i c e i n d u s t r i e s tend t o be e i t h e r h i g h - p a y i n g or l o w - p a y i n g w h i l e m a n u f a c t u r i n g i n d u s t r i e s t e n d t o pay p r e d o m i n a n t l y moderate weekly wages t o w o r k e r s . S e r v i c e i n d u s t r i e s p a i d 8 out of the 10 h i g h e s t average weekly wage l e v e l s r e c o r d e d i n T a b l e 7, and 6 out of the 10 l o w e s t weekly wage r a t e s . In c o n t r a s t 9 out of 14 i n d u s t r i e s p a y i n g moderate weekly wages a r e m a n u f a c t u r i n g i n d u s t r i e s . 1 12 Tab l e 7 - Average Weekly E a r n i n g s f o r I n d u s t r i e s i n M e t r o p o l i t a n Vancouver, 1986 y I n d u s t r i e s Rank Average Weekly Wages, 1986 ($) U t i l i t i e s 1 685.01 St o r a g e 2 673.36 Wholesale Trade 3 667.88 T r a n s p o r t a t i o n 4 617.21 T r a n s p o r t . E q u i p . 5 612.96 L o c a l Government 6 605.04 Communication 7 601.61 P r o v i n c i a l Gov't. 8 601.36 F e d e r a l Gov't. 9 597.67 Wood P r o d u c t s 10 595.51 E l e c t r i c a l P r o d u c t s 1 1 579.63 N o n - M e t a l l . M i n . Pr o d . 1 2 578.41 M e t a l F a b r i c a t i n g 13 578.35 Chemical P r o d u c t s 14 564.96 C o n s t r u c t i o n 15 528.68 Food and Beverage 16 522.52 P r i n t i n g and P u b l i s h . 17 522.00 E d u c a t i o n 18 512.55 Machinery 20 504.03 Paper and A l l i e d P r o d . 20 504.03 Rubber and P l a s t i c s 20 504.03 F i n a n c e 22 499.00 In s u r a n c e and R e a l E s t . 23 477.63 B u s i n e s s S e r v i c e s 24 459.29 F u r n i t u r e and F i x t u r e s 25 426.84 Other M a n u f a c t u r i n g 26 397.31 T e x t i l e s 27 362.65 H e a l t h and S o c i a l 28 358.99 Other S e r v i c e s 29 338.55 R e t a i l Trade 30 314.11 C l o t h i n g 31 307. 17 Amusement and Rec. 32 256.04 P e r s o n a l S e r v i c e s 33 221.33 Accomodation and Food 34 198.25 Source: S t a t i s t i c s Canada (1988). Employment, e a r n i n g s and h o u r s . C a t . No. 72-002. 113 4.2.4 M u l t i p l i e r Performance At p r e s e n t , t h e r e i s no s a t i s f a c t o r y d a t a on m u l t i p l i e r s f o r i n d u s t r i e s i n m e t r o p o l i t a n Vancouver. The l a s t s tudy e s t i m a t i n g s a l e s and employment m u l t i p l i e r s was performed by D a v i s (1972) and the m u l t i p l e r s c a l c u l a t e d a t t h a t time are l i s t e d i n T a b l e 8. These m u l t i p l i e r s cannot be used t o i d e n t i f y p r o p u l s i v e i n d u s t r i e s i n Vancouver i n 1988. I n p u t - o u t p u t a n a l y s i s measures the e f f e c t s of a change i n f i n a l demand i n one i n d u s t r y on o v e r a l l income and employment growth i n an urban economy f o r one p o i n t i n t i m e . The m u l t i p l i e r performance of l o c a l i n d u s t r i e s changes over the s h o r t t o medium run i n response t o changes i n the s i z e and d i v e r s i t y of i n d u s t r i e s i n an economy; the number and s i z e of f i r m s w i t h i n i n d u s t r i e s ; the goods and s e r v i c e s produced and the o r g a n i z a t i o n of p r o d u c t i o n a c t i v i t i e s w i t h i n each f i r m . Advanced m e t r o p o l i t a n economies such as Vancouver have e x p e r i e n c e d s i g n i f i c a n t changes i n s t r u c t u r e s i n c e the e a r l y 1970s due t o the expanding r o l e of s e r v i c e s such as t r a n s p o r t a t i o n , communication, f i n a n c e , b u s i n e s s s e r v i c e s , h e a l t h and advanced e d u c a t i o n and r e s e a r c h . As such i n d u s t r i e s grow i n s i g n i f i c a n c e t o urban economies they reshape the s u r r o u n d i n g economic l a n d s c a p e t o f i t t h e i r needs. I n d u s t r i e s w i t h a r e l a t i v e l y h i g h p r o p o r t i o n of t e c h n i c a l and p r o f e s s i o n a l workers w i l l s u p p o r t a p e r i p h e r a l network of s e r v i c e s and i n d u s t r i e s based i n p r o f e s s i o n a l and t e c h n i c a l a c t i v i t i e s . . . Such a c o n s t e l l a t i o n or network of f i r m s emerges t h r o u g h the p r o g r e s s i v e d i s t r i b u t i o n of s p e c i a l i z e d t a s k s from the c e n t r a l i n d u s t r y or s e c t o r t o o t h e r f i r m s and s e c t o r s i n the c i t y ( H i r s c h h o r n 1979 p.111-112). Employment and s a l e s m u l t i p l i e r s from 1985 or more r e c e n t a r e 114 n e c e s s a r y f o r i d e n t i f y i n g p r o p u l s i v e i n d u s t r i e s i n Vancouver because of changes i n the p r o d u c t i o n a c t i v i t i e s of l o c a l i n d u s t r i e s ( r a t i o n a l i z a t i o n , r e l o c a t i o n , c l o s u r e ) brought on by the 1981-1984 r e c e s s i o n ( p e r s . com. O t t o Knauf CEIC, Oct. 1987). 1 15 Tab l e 8 - Employment and S a l e s M u l t i p l i e r s f o r M e t r o p o l i t a n Vancouver I n d u s t r i e s , 1971. I n d u s t r i e s Employment M u l t i p l i e r 1971(1) Rank: S a l e s M u l t i p l i e r 1971(2) Rank: Food and Beverage 61 .80 1 4 1 .63 11.5 Wood P r o d u c t s 70.70 1 2 1 .49 16 Paper and A l l i e d P r o d . 60.69 15 1 .64 9 P r i n t i n g and P u b l i s h . 76.81 10 1 .67 6.5 M e t a l F a b r i c a t i n g 69.39 13 1 .63 11.5 Non-Metal. M in. P r o d . 91.12 6 1 .97 1 C h e m i c a l s / P e t r o l e u m 1 5.03 17 1.18 17 Other M a n u f a c t u r i n g 74.32 1 1 1 .50 15 C o n s t r u c t i o n 90.05 7 1 .68 4.5 Trade and T r a n s p o r t 160.70 1 1 .69 2.5 Communication 89. 19 8 1 .64 9 U t i l i t i e s 53.50 16 1 .54 1 4 F i n a n c e , I n s u r a n c e and R e a l E s t a t e 85.99 9 1 .69 2.5 H e a l t h and W e l f a r e 138.38 3 • 1 .64 9 E d u c a t i o n 136.25 4 1 .68 4.5 B u s i n e s s S e r v i c e s 93.39 5 1 .67 6.5 Other S e r v i c e s 145.04 2 1.61 13 Sour c e : D a v i s , H.C. 1972. T a b l e I I - 6 , I I - 7 . (1) P e r s o n - y e a r s of employment g e n e r a t e d by $1 m i l l i o n i n c r e a s e i n i n d u s t r y o u t p u t . (2) R e g i o n a l income per d o l l a r of i n d u s t r y o u t p u t . 116 4.2.5 S e n s i t i v i t y To The B u s i n e s s C y c l e Annual employment d a t a (1981-1986) can be used t o i d e n t i f y i n d u s t r i e s i n Vancouver which a r e s e n s i t i v e t o changes i n the b u s i n e s s c y c l e . S e n s i t i v i t y t o r e c e s s i o n can be measured by the p e r c e n t change i n employment between 1981 and 1984, and t h i s d a t a i s l i s t e d i n T a b l e 9. In t u r n s e n s i t i v i t y t o economic e x p a n s i o n can be measured by the p e r c e n t change i n employment between 1984 and 1986, and t h i s d a t a can be found i n T a b l e 10. D u r i n g the 1981-84 r e c e s s i o n , 18 out of the 28 Vancouver i n d u s t r i e s l i s t e d i n T a b l e 9 e x p e r i e n c e d employment l o s s e s . Of t h e s e , wood p r o d u c t s i s the most n o t a b l e w i t h a 45.7% employment l o s s between 1981-1984. I n d u s t r i e s which a r e h i g h l y s e n s i t i v e t o r e c e s s i o n i n c l u d e wood p r o d u c t s , t r a n s p o r t a t i o n , paper and a l l i e d p r o d u c t s , metal f a b r i c a t i n g , s p e c i a l t r a d e c o n t r a c t o r s , w h o l e s a l e t r a d e , b u s i n e s s s e r v i c e s , g e n e r a l c o n t r a c t o r s , amusement and r e c r e a t i o n and r e t a i l t r a d e . Of the 9 i n d u s t r i e s which e x p e r i e n c e d employment growth d u r i n g the 1981-84 r e c e s s i o n , 7 a r e s e r v i c e s . T h i s f u r t h e r i n d i c a t e s the i m p o r t a n t r o l e of s e r v i c e i n d u s t r i e s i n g e n e r a t i n g economic growth i n m e t r o p o l i t a n Vancouver. The s h i f t from economic r e c e s s i o n t o r e c o v e r y and growth between 1984 and 1986 i s e v i d e n t i n the changes i n employment f o r Vancouver i n d u s t r i e s l i s t e d i n T a b l e 10. 19 out of 27 l o c a l i n d u s t r i e s e x p e r i e n c e d employment growth between 1984 and 1986. Of t h e 10 i n d u s t r i e s w i t h the s t r o n g e s t employment growth between 1984-86, 7 a r e s e r v i c e s . , Wood p r o d u c t s a l s o demonstrated s t r o n g employment growth (+45.5%) over the 1984-86 117 p e r i o d . 7 l o c a l i n d u s t r i e s l o s t employment between 1984-86 w i t h employment i n u t i l i t i e s d e c l i n i n g by 58%. I t i s i m p o r t a n t t o be s e n s i t i v e t o the d i f f e r e n c e s between s t r u c t u r a l economic change which can cause t r a n s f e r s of employment between i n d u s t r i e s , and net employment changes. In the case of u t i l i t i e s , much of the employment l o s s between 1984-1986 r e s u l t e d from the t r a n f e r of workers t o b u s i n e s s s e r v i c e s r a t h e r than a net employment l o s s f o r Vancouver ( p e r s . com. O t t o Knauf CEIC, 1987). 118 T a b l e 9 - I n d u s t r y S e n s i t i v i t y t o R e c e s s i o n , 1981-1984 I n d u s t r y Rank % Employ. Change 1981-1984 E l e c t r i c a l P r o d u c t s 1 48.5% P e r s o n a l S e r v i c e s 2 28.2% I n s u r a n c e C a r r i e r s 3 19.2% Accommod. and Food 4 14.0% Other M a n u f a c t u r i n g 5 12.9% F i n a n c e 6 10.0% Other S e r v i c e s 7.5 9.0% H e a l t h and S o c i a l 7.5 9.0% E d u c a t i o n 9 3.6% Food and Beverage 10 0.0% P r i n t i n g and P u b l . 1 1 -1.5% U t i l i t i e s 12 -2.2% Communication 13 -2.3% F e d e r a l Gov't. 14 -2.4% L o c a l Gov't. 15 -2.8% P r i m a r y M e t a l P r o d . 16 -3.2% I n s u r . Ag. and R.E. 17 -4.3% P r o v i n c i a l Gov't 18 -6.0% R e t a i l Trade 19 -8.5% Amusement and Rec r . 20 -10.6% G e n e r a l C o n t r a c t o r s 21 -11.8% B u s i n e s s S e r v i c e s 22 -13.0% Who l e s a l e Trade 23 -13.5% S p e c i a l T r . C o n t r . 24 -18.6% M e t a l F a b r i c a t i n g 25 -27.7% Paper and A l l i e d 26 -30.0% T r a n s p o r t a t i o n 27 -31.1% Wood P r o d u c t s 28 -45.7% 119 Table 10 - I n d u s t r y S e n s i t i v i t y t o Recovery, 1984-1986 I n d u s t r y Rank % Employ. Change 1984-1986 Amusement and Rec. 1 59.1% Wood P r o d u c t s 2 45.5% Other S e r v i c e s 3 36.9% Communication 4 31.8% P r i n t i n g and P u b l . 5 27.3% F e d e r a l Government 6 23.3% Accommod. and Food 7 23. 1% Other M a n u f a c t u r i n g 8 22.9% I n s u r . Ag. and R.E. 9 22.3% P e r s o n a l S e r v i c e s 10 17.3% R e t a i l Trade 1 1 15.3% Prov . Gov't 12 14.9% M e t a l F a b r i c a t i n g 13 14.7% B u s i n e s s S e r v i c e s . 14 13.4% Wholesale Trade. 15 13.3% T r a n s p o r t a t i o n 16 11.7% S p e c i a l T r . C o n t r . 17 7.3% F i n a n c e 18 5.3% H e a l t h and S o c i a l 19 3.3% E d u c a t i o n 20 0.0% Gen. C o n t r a c t o r s 21 -2.7% L o c a l Gov't 22 -2.9% I n s u r a n c e C a r r i e r s 23 -4.6% Food and Bev. 24 -13.8% Paper and A l l i e d 25 -23.8% E l e c t r i c a l P r o d u c t s 26 -28.6% U t i l i t i e s 27 -58.0% 120 4.2.6 I n d u s t r y Data Aggregated At The P r o v i n c i a l And N a t i o n a l  L e v e l s I n d u s t r y d a t a on employment e a r n i n g s p r o f i l e s , R&d i n t e n s i t y , e x p o r t o r i e n t a t i o n , v u l n e r a b i l i t y t o import p e n e t r a t i o n of domestic markets and c o n c e n t r a t i o n r a t i o s i s not a v a i l a b l e a t the m e t r o p o l i t a n l e v e l . Urban economic r e s e a r c h e r s and p l a n n e r s f a c e a f o r m i d a b l e c h a l l e n g e i n c o l l e c t i n g and a n a l y z i n g d a t a on t h e s e i n d u s t r y c h a r a c t e r i s t i c s f o r a more comprehensive i d e n t i f i c a t i o n of l o c a l p r o p u l s i v e i n d u s t r i e s . T h i s t a s k c o u l d be a i d e d i n p a r t by the m o d i f i c a t i o n and e x p a n s i o n of e x i s t i n g d a t a c o l l e c t i o n and a n a l y s i s a c t i v i t i e s of s e n i o r l e v e l s of government. Employment e a r n i n g s p r o f i l e s c o u l d be g e n e r a t e d a t the m e t r o p o l i t a n l e v e l by expanding the Labour F o r c e Survey ( S t a t i s t i c s Canada 72-001, monthly) or the Census of Canada ( S t a t i s t i c s Canada 1981, 1986). Annual average o c c u p a t i o n a l p r o f i l e s f o r n i n e i n d u s t r y d i v i s i o n s and n i n e o c c u p a t i o n s a t the p r o v i n c i a l l e v e l a r e g e n e r a t e d from the Labour F o r c e Survey. The Census of Canada ( F e b r u a r y 1984 C a t . No. 92-923, T a b l e 1) p u b l i s h e s p r o v i n c i a l l e v e l d a t a on the d i s t r i b u t i o n of employment among 11 i n d u s t r y d i v i s i o n s and 22 o c c u p a t i o n s . W i t h i n the l a b o u r f o r c e s u r v e y , o c c u p a t i o n s w i t h l e s s than 4000 workers i n an i n d u s t r y a r e not r e p o r t e d because of the h i g h v a r i e n c e s r e s u l t i n g from a s m a l l sample s i z e . In a d d i t i o n , t h e r e i s no a v a i l a b l e d a t a on the e a r n i n g s f o r each o c c u p a t i o n which i s n e c e s a r y f o r s o r t i n g t o t a l employment i n each i n d u s t r y i n t o h i g h , medium and low-wage j o b s . 121 S t a t i s t i c s Canada r e p o r t s on t o t a l R&D e x p e n d i t u r e s a t the p r o v i n c i a l l e v e l f o r 3 s e c t o r s i n 1985: wood based i n d u s t r i e s ($25 m i l l i o n ) , o t h e r m a n u f a c t u r i n g ($98 m i l l i o n ) , and s e r v i c e s ($62 m i l l i o n ) ( S t a t i s t i c s Canada June 1987b p.88). C o n f i d e n t i a l i t y r e s t r i c t i o n s on d a t a from i n d i v i d u a l f i r m s and the s m a l l number of f i r m s engaged i n R&D a r e the p r i n c i p a l r easons f o r not r e p o r t i n g R&D i n t e n s i t y of major i n d u s t r y groups at the m e t r o p o l i t a n l e v e l . R&D a c t i v i t y i s h e a v i l y c o n c e n t r a t e d i n the Canadian economy. 421 f i r m s i n 5 major i n d u s t r i e s account f o r 51% of t o t a l R&D e x p e n d i t u r e s : t e l e c o m m u n i c a t i o n equipment, a i r c r a f t and p a r t s , w e l l s and p e t r o l e u m p r o d u c t s , e n g i n e e r i n g and s c i e n t i f i c s e r v i c e s , and b u s i n e s s machinery ( S t a t i s t i c s Canada 1987 p.20). Trade s t a t i s t i c s a r e r e p o r t e d f o r the most p a r t by commodity r a t h e r than i n d u s t r y ( S t a t i s t i c s Canada, 65-001, 004, 007, 202, 203). The Department of R e g i o n a l Economic E x p a n s i o n (DRIE 1986) has r e c e n t l y begun t o r e p o r t t r a d e s t a t i s t i c s f o r Canadian m a n u f a c t u r i n g i n d u s t r i e s , and S t a t i s t i c s Canada (June 1986) r e p o r t s on Canada's i n t e r n a t i o n a l t r a d e i n s e r v i c e s (1969-1984). At the p r o v i n c i a l l e v e l , the C e n t r a l S t a t i s t i c s Bureau of the B.C. M i n i s t r y of Economic Development d i s - a g g r e g a t e s DRIE s t a t i s t i c s on e x p o r t s a l e s (1980-1986). W h i l e t h e s e d a t a s o u r c e s a r e a g g r e g a t e d a t the p r o v i n c i a l and f e d e r a l l e v e l , . i t s u g g e s t s t h a t i n d u s t r y - b a s e d t r a d e s t a t i s t i c s a r e becoming more a v a i l a b l e due i n l a r g e p a r t t o r e s e a r c h i n t o the impacts of f r e e - t r a d e on the Canadian and B.C. economies. These s u r v e y s c o u l d be expanded t o r e p o r t on e x p o r t o r i e n t a t i o n and 1 22 v u l n e r a b i l i t y t o import p e n e t r a t i o n of i n d u s t r i e s a t the m e t r o p o l i t a n l e v e l . Data on f o u r and e i g h t f i r m c o n c e n t r a t i o n r a t i o s f o r Canadian i n d u s t r i e s i s a v a i l a b l e from S t a t i s t i c s Canada ( A p r i l 1987 p.28). T h i s d a t a cannot be used t o i d e n t i f y l o c a l p r o p u l s i v e i n d u s t r i e s because of the a g g r e g a t e d t r e a t m e n t of s e r v i c e i n d u s t r i e s . W h i l e b u s i n e s s and p e r s o n a l s e r v i c e s a r e composed l a r g e l y of s m a l l f i r m s , the same i s not t r u e f o r f i n a n c e and i n s u r a n c e . The a g g r e g a t i o n of s e r v i c e i n d u s t r i e s i s due i n p a r t t o the use of the 1960 SIC (which u n d e r - r e p r e s e n t s s e r v i c e s ) by the I n d u s t r i a l O r g a n i z a t i o n and F i n a n c e D i v i s i o n of S t a t i s t i c s Canada ( A p r i l 1987 p . 8 0 ) . The use of the 1960 SIC i s s e r i o u s l y f l a w e d because of the expanded r o l e of s e r v i c e s p r o v i d e d i n the 1980 r e v i s i o n t o the SIC ( S t a t i s t i c s Canada 1980). I n s t i t u t i o n s such as S t a t i s t i c s Canada, DRIE and the C e n t r a l S t a t i s t i c s Bureau a r e o r i e n t e d toward s e r v i n g the i n f o r m a t i o n r e q u i r e m e n t s of the f e d e r a l and p r o v i n c i a l government r e s p e c t i v e l y . M u n i c i p a l i t i e s a r e u n l i k e l y t o r e c e i v e much h e l p from s e n i o r government a g e n c i e s i n c o l l e c t i n g and a n a l y s i n g d a t a on the p r o p u l s i v e c h a r a c t e r i s t i c s of l o c a l i n d u s t r i e s . For example, S t a t i s t i c s Canada i s p r e s e n t l y r e d u c i n g the amount and k i n d s of d a t a r e p o r t e d i n r e g u l a r p u b l i c a t i o n s and the Census of Canada. These c u t - b a c k s o f t e n i n v o l v e the removal of urban l e v e l s t a t i s t i c s from p u b l i c a t i o n . For example,- Employment, e a r n i n g s and hours (November 1987 p. 179) d i s c o n t i n u e d p u b l i s h i n g weekly e a r n i n g s s t a t i s t i c s f o r 123 major i n d u s t r y groups a t the m e t r o p o l i t a n l e v e l i n June 1985 ( a l t h o u g h t h i s d a t a can s t i l l be p u r c h a s e d from S t a t i s t i c s Canada). 4.3 U s i n g E x i s t i n g Data In A P r o v i s i o n a l I d e n t i f i c a t i o n Of  P r o p u l s i v e I n d u s t r i e s In Vancouver A v a i l a b l e d a t a on t o t a l employment, net employment growth, average weekly e a r n i n g s and s e n s i t i v i t y t o economic r e c e s s i o n and e x p a n s i o n w i l l now be used t o p r o v i s i o n a l l y i d e n t i f y p r o p u l s i v e i n d u s t r i e s i n Vancouver. T h i s e x e r c i s e i s undertaken t o demonstrate how p r o p u l s i v e i n d u s t r i e s c o u l d be i d e n t i f i e d i f comprehensive d a t a was a v a i l a b l e f o r a l l of the proposed c r i t e r i a . A summary of a v a i l a b l e d a t a on the p r o p u l s i v e c h a r a c t e r i s t i c s of i n d u s t r i e s i n m e t r o p o l i t a n Vancouver i s l i s t e d i n t a b l e 11. T h i s t a b l e can be used t o p o i n t out some of the t r a d e - o f f s i n i d e n t i f y i n g l o c a l p r o p u l s i v e i n d u s t r i e s . T r a n s p o r t a t i o n and Wood P r o d u c t s a r e l a r g e i n d u s t r i e s p a y i n g h i g h wages which e x h i b i t poor employment growth performance (1981-86) and h i g h s e n s i t i v i t y t o economic r e c e s s i o n (1981-84). In c o n t r a s t , Accommodation and Food, H e a l t h and S o c i a l S e r v i c e s , and P e r s o n a l S e r v i c e s a r e l a r g e i n d u s t r i e s w i t h s t r o n g growth performance between 1981-86 and d u r i n g the 1981-84 r e c e s s i o n which pay v e r y low wages. I n d u s t r i e s such as Communication, and t o a l e s s e r degree, the F e d e r a l Government e x h i b i t moderate t o s t r o n g performance a c r o s s a l l of the c r i t e r i a . Paper and A l l i e d P r o d u c t s on the o t h e r hand, e x h i b i t s poor performance a c r o s s a l l f i v e c r i t e r i a and i s hot a p r o p u l s i v e i n d u s t r y i n Vancouver. 124 I n d u s t r y r a n k s from a v a i l a b l e d a t a a r e d i s p l a y e d i n T a b l e 12. In Ta b l e 13, l o c a l i n d u s t r i e s a r e l i s t e d by o v e r a l l p r o p u l s i v e performance (based on the sum of the ranks of the c r i t e r i a i n T a b l e 12). T h i s approach does not i n d i c a t e the magnitude of d i f f e r e n c e s i n p r o p u l s i v e c h a r a c t e r i s t i c s between i n d u s t r i e s of d i f f e r e n t r a n k s . I t shows o n l y the r e l a t i v e r a nks of l o c a l i n d u s t r i e s and i s used t o p r o v i d e some t e n t a t i v e i n s i g h t s on p r o p u l s i v e i n d u s t r i e s i n m e t r o p o l i t a n Vancouver. Nine of the t o p t e n p r o p u l s i v e i n d u s t r i e s i n Vancouver a r e s e r v i c e s l e d by Communication, Accommodation and Food, and H e a l t h and S o c i a l S e r v i c e s . P r i n t i n g and P u b l i s h i n g had the h i g h e s t o v e r a l l p r o p u l s i v e r a n k i n g among m a n u f a c t u r i n g i n d u s t r i e s ( 1Oth). 125 Ta b l e 11 - Summary of A v a i l a b l e Data on P r o p u l s i v e I n d u s t r i e s i n M e t r o p o l i t a n Vancouver, 1981-1986 T o t a l Employ. Aver. S e n s i t . S e n s i t . I n d u s t r i e s Employ Growth Weekly Recess. Recov. 1986 1981-86 E a r n . 1981-84 1984-86 Food and Beverage 12.5 -2.0 522.52 0.0% -13.8% Wood P r o d u c t s 14.7 -3.9 595.51 -45.7% 45.5% P a p e r / A l l i e d P r od. 3.2 -2.8 504.03 -30.0% -23.8% P r i n t i n g / P u b l i s h i n g 8.4 1 .7 522.00 -1.5% 27.3% M e t a l F a b r i c a t i n g 7.8 -1 .6 578.35 -27.7% 14.7% E l e c t r i c a l P r o d u c t s 3.5 0.2 579.63 48.5% -28.6% Other M a n u f a c t u r i n g 4.3 1.2 397.31 12.9% 22.9% G e n e r a l C o n t r a c t o r s 14.5 -2.4 528.68 -11.8% -2.7% Spec. T r . C o n t r . 20.6 -3.0 528.68 -18.6% 7.3% T r a n s p o r t a t i o n 38. 1 -11.4 617.21 -31.1% 11.7% Communication 22.8 5.1 601.61 -2.3% 31.8% U t i l i t i e s 3.7 -5.3 685.01 -2.2% -58.0% Wh o l e s a l e Trade 44.2 -0.9 667.88 -13.5% 13.3% R e t a i l Trade 86.7 4.5 314.11 -8.5% 15.3% F i n a n c e 27.8 3.8 499.00 10.0% 5.3% I n s u r . C a r r i e r s 8.3 1.0 477.63 19.2% -4.6% I n s u r . Ag. and R. E. 19.2 2.8 477.63 -4.3% 22.3% B u s i n e s s S e r v i c e s 43.2 -0.6 459.29 -13.0% 13.4% Accommod. and Food 48.0 13.8 198.25 14.0% 23.1% E d u c a t i o n 40. 1 1 .4 512.55 3.6% 0.0% H e a l t h and S o c i a l 58.8 6.6 358.99 9.0% 3.3% Amusement and Rec r . 14.8 4.4 256.04 -10.6% 59. 1% P e r s o n a l S e r v i c e s 17.6 5.9 221.33 28.2% 17.3% Other S e r v i c e s 21.5 7.1 338.55 9.0% 36.9% F e d e r a l Gov't 14.8 2.5 597.67 -2.4% 23.3% P r o v . Gov't 10.8 0.8 601.36 -6.0% 14.9% L o c a l Gov't 13.6 -0.8 605.04 -2.8% -2.9% 1 26 Table 12 - The Propulsive Ranks of Industries in Metropolitan Vancouver, 1981-1986 Total Employ. Aver. Sensit. Sensit. Industries Employ Growth Weekly Recess. Recov. 1986 1981-86 Earn. 1981-84 1984-86 Food and Beverage 19 24 16 '10 24 Wood Products 16 28 10 28 2 Paper/ A l l i ed Prod. 29 26 20 26 25 Print ing/ Publishing 21 1 1 17 1 1 5 Metal Fabricating 23 23 1 3 25 13 Elec tr ica l Products 28 1 6 1 1 1 26 Other Manufacturing 24 13 26 5 8 General Contractors 17 25 15 21 21 Spec. Tr . Contr. 1 1 27 15 24 1 7 Transportation 7 30 4 27 16 Communicat ion 9 5 7 1 3 4 U t i l i t i e s 27 29 1 1 2 27 Wholesale Trade 4 20 3 23 15 Retail Trade 1 6 30 19 1 1 Finance 8 8 22 6 18 Insur. Carriers 22 14 23 3 23 Insur. Ag. and R. E. 12 9 23 17 9 Business Services 5 18 24 22 1 4 Accommod. and Food 3 1 34 4 7 Education 6 1 2 18 9 20 Health and Social 2 3 28 7.5 19 Amusement and Recr. 14.5 7 32 20 1 Personal Services 13 4 33 2 10 Other Services 10 2 29 7.5 3 Federal Gov't 14.4 10 9 14 6 Prov. Gov't 20 15 8 18 1 2 Local Gov't 18 19 6 15 22 127 T a b l e 13 - M e t r o p o l i t a n Vancouver I n d u s t r i e s Ranked by O v e r a l l P r o p u l s i v e Performance Sum of I n d u s t r y Ranks Communication 38 Accommodation and Food 49 Other S e r v i c e s 51 .5 F e d e r a l Gov't 53.5 H e a l t h and S o c i a l 59.5 P e r s o n a l S e r v i c e s 62 F i n a n c e 62 Wholesale Trade 65 E d u c a t i o n 65 P r i n t i n g and P u b l i s h i n g 65 R e t a i l Trade 67 I n s u r . Agents and R.E. 70 P r o v i n c i a l Gov't 73 Amusement and R e c r e a t i o n 74.5 Other M a n u f a c t u r i n g L o c a l Gov't 76 80 E l e c t r i c a l P r o d u c t s 82 B u s i n e s s S e r v i c e s 83 Wood P r o d u c t s 84 T r a n s p o r t a t i o n 84 I n s u r a n c e C a r r i e r s 85 Food and Beverage 93 S p e c i a l Trade C o n t r a c t o r s 94 U t i l i t i e s 96 M e t a l F a b r i c a t i n g 97 G e n e r a l C o n t r a c t o r s 99 Paper and A l l i e d P r o d u c t s 126 128 4.4 C o n c l u s i o n s Urban economic p o l i c y m a k e r s have v e r y l i t t l e i n f o r m a t i o n on the p r o p u l s i v e c h a r a c t e r i s t i c s of l o c a l i n d u s t r i e s . There a r e e x t e n s i v e gaps i n the e x i s t i n g d a t a f o r i d e n t i f y i n g p r o p u l s i v e i n d u s t r i e s i n m e t r o p o l i t a n Vancouver. S t a t i s t i c s a r e a v a i l a b l e f o r t o t a l i n d u s t r y employment, employment growth performance (1981-1986), and average weekly wages (1986). Employment d a t a can be used t o measure i n d u s t r y s e n s i t i v i t y t o economic r e c e s s i o n (1981-1984) and e x p a n s i o n (1984-1986). Some d a t a on employment o c c u p a t i o n a l p r o f i l e s , R&D i n t e n s i t y , e x p o r t o r i e n t a t i o n , v u l n e r a b i l i t y t o import p e n e t r a t i o n of domestic markets and i n d u s t r y c o n c e n t r a t i o n i s a v a i l a b l e a t the p r o v i n c i a l and n a t i o n a l l e v e l . These d a t a s o u r c e s a r e not r e p o r t e d a t the m e t r o p o l i t a n l e v e l because of s m a l l sample s i z e s and c o n f i d e n t i a l i t y r e s t r i c t i o n s . In a d d i t i o n t o the l i m i t a t i o n s of g e o g r a p h i c a g g r e g a t i o n , t h e s e d a t a s o u r c e s l a r g e l y a d d r e s s m a n u f a c t u r i n g i n d u s t r i e s and not s e r v i c e s . S e n i o r l e v e l s of government c o u l d p r o v i d e v i t a l a s s i s t a n c e i n i d e n t i f y i n g p r o p u l s i v e i n d u s t r i e s a t the m e t r o p o l i t a n l e v e l by expanding and m o d i f y i n g e x i s t i n g s t a t i s t i c a l s u r v e y s . However, the n e c e s s a r y m o d i f i c a t i o n s and e x p a n s i o n of e x i s t i n g s u r v e y s a r e u n l i k e l y t o o c c u r because the i n f o r m a t i o n needs of s e n i o r governments a r e the t o p p r i o r i t y f o r S t a t i s t i c s Canada, DRIE and the C e n t r a l S t a t i s t i c s Bureau (B.C. M i n s t r y of Economcic Development). Urban economic p o l i c y m a k e r s f a c e s i g n i f i c a n t c h a l l e n g e s i n 1 29 i d e n t i f y i n g the p r o p u l s i v e c h a r a c t e r i s t i c s of l o c a l i n d u s t r i e s . E x i s t i n g d a t a s o u r c e s make use of i n d u s t r y d i v i s i o n s and major groups which a r e common t o the 1960, 1970 and 1980 SIC. The SIC system c l a s s i f i e s e s t a b l i s h m e n t s i n t o i n d u s t r i e s on the b a s i s of p r i m a r y p r o d u c t i o n a c t i v i t i e s and t h i s approach l e a d s t o the i n c l u s i o n of s e r v i c e f u n c t i o n s w i t h i n m a n u f a c t u r i n g i n d u s t r i e s . U s i n g the SIC system l i m i t s the o p p o r t u n i t i e s t o i d e n t i f y l o c a l i n d u s t r i e s w i t h s i g n i f i c a n t p r o p u l s i v e p o t e n t i a l . These a r e o f t e n r e l a t i v e l y new, s m a l l i n d u s t r i e s u s i n g new t e c h n o l o g i e s and a r e o f t e n not c l a s s i f i e d i n e x i s t i n g i n d u s t r y c a t e g o r i e s . For example, i t wasn't u n t i l the 1980 r e v i s i o n of the SIC t h a t s e r v i c e i n d u s t r i e s were g i v e n i n c r e a s e d r e p r e s e n t a t i o n a t the d i v i s i o n and major group l e v e l comparable t o m a n u f a c t u r i n g . D i f f e r e n t departments w i t h i n S t a t i s t i c s Canada make use of d i f f e r e n t SICs (1960, 1970, 1980). T h i s r e q u i r e s economic r e s e a r c h e r s t o aggr e g a t e d a t a t o e s t a b l i s h a common s e t of i n d u s t r i e s arid f r e q u e n t l y r e s u l t s i n a l o s s of d e t a i l e d i n d u s t r y i n f o r m a t i o n e s p e c i a l l y f o r s e r v i c e s . The t i m e l i n e s s of i n d u s t r y d a t a i s a c r i t i c a l i s s u e i n i d e n t i f y i n g p r o p u l s i v e i n d u s t r i e s (George 1983 p.33). S a l e s and employment m u l t i p l i e r s f o r m e t r o p o l i t a n Vancouver have not been updated s i n c e 1971 ( D a v i s 1972). Changes i n p r o d u c t s and p r o d u c t i o n p r o c e s s e s of l o c a l f i r m s and i n d u s t r i e s and changes i n urban economic s t r u c t u r e , most n o t a b l y the e x p a n s i o n of the s e r v i c e s e c t o r , s i g n i f i c a n t l y change the s t r e n g t h and d i v e r s i t y of l o c a l i n t e r - i n d u s t r y l i n k a g e s over the s h o r t t o medium term. An urban economy i s a complex, dynamic system. The a v a i l a b i l i t y 130 of c u r r e n t i n f o r m a t i o n on i n d u s t r y s a l e s and p u r chases i s e s s e n t i a l f o r i d e n t i f y i n g l o c a l p r o p u l s i v e i n d u s t r i e s . I n p u t - o u t p u t a n a l y s i s i s a c o s t l y a n a l y t i c a l p r o c e s s r e q u i r i n g a s u b s t a n t i a l commitment from l o c a l p o l i c y m a k e r s i n d a t a c o l l e c t i o n , a n a l y s i s and u p d a t i n g . I f t h i s l e v e l of commitment i s not p o s s i b l e , then s i m p l e r a l t e r n a t i v e measures of the s t r e n g t h and d i v e r s i t y of i n t e r - i n d u s t r y l i n k a g e s w i l l have t o be d e v e l o p e d . An a l t e r n a t i v e approach t o i n p u t - o u t p u t a n a l y s i s used by Ley and H utton (1987) i s t o measure the e x t e n t of i n d u s t r y s a l e s and p u r chases l o c a l l y , n a t i o n a l l y and i n t e r n a t i o n a l l y . T h i s approach a f f o r d s i n s i g h t s i n t o the d i f f e r e n c e s between i n d u s t r i e s i n the s t r e n g t h of l o c a l d i r e c t and i n d i r e c t l i n k a g e s . Urban economic r e s e a r c h e r s and p o l i c y m a k e r s can g a i n a d d i t i o n a l i n s i g h t s i n t o the s t r e n g t h and d i v e r s i t y of i n t e r - i n d u s t r y l i n k a g e s i n advanced m e t r o p o l i t a n economies by i d e n t i f y i n g l o c a l i n d u s t r i a l complexes. Four i n d u s t r i a l complexes i n Vancouver i n c l u d e : the s e a p o r t ; advanced b u s i n e s s s e r v i c e s i n the CBD; m e d i c a l s e r v i c e s ; and advanced e d u c a t i o n and r e s e a r c h i n s t i t u t e s . I t i s i m p o r t a n t t o be s e n s i t i v e t o the dynamism of i n d i v i d u a l f i r m s when i d e n t i f y i n g p r o p u l s i v e i n d u s t r i e s . Two-t h i r d s of employment growth i n urban economies d u r i n g the 1970s i s a t t r i b u t a b l e t o f i r m s w i t h 20 employees or l e s s ( B i r c h 1979, 1981). F i r m s w i t h fewer than 20 employees c r e a t e d the b u l k of employment growth i n Vancouver between 1980 and 1984 ( C i t y of Vancouver 1985a p.49-50). Aggregate s t a t i s t i c s d e s c r i b i n g growth and change at the i n d u s t r y l e v e l do not account f o r 131 s i g n i f i c a n t changes which may be o c c u r i n g w i t h i n i n d i v i d u a l f i r m s i n an i n d u s t r y . For example, a d e c l i n e i n employment i n a few l a r g e f i r m s may obscure a h i g h degree of growth and v i t a l i t y i n newer, s m a l l e r f i r m s w i t h i n an i n d u s t r y ( B i r c h and MacCraken 1 984 p .11). A p r o v i s i o n a l i d e n t i f i c a t i o n of p r o p u l s i v e i n d u s t r i e s can be made u s i n g the c r i t e r i a f o r which d a t a i s a v a i l a b l e ( i n d u s t r y s i z e , growth performance, average wages, and s e n s i t i v i t y t o r e c e s s i o n and e x p a n s i o n ) . T h i s e x e r c i s e h i g h l i g h t s the v i t a l r o l e of s e r v i c e s which make up the n i n e of the t e n most p r o p u l s i v e i n d u s t r i e s i n m e t r o p o l i t a n Vancouver. An i d e n t i f i c a t i o n of l o c a l p r o p u l s i v e i n d u s t r i e s u s i n g employment e a r n i n g s p r o f i l e s , m u l t i p l i e r performance, e x p o r t o r i e n t a t i o n and v u l n e r a b i l i t y t o i m p o r t s would r e q u i r e a f i n a n c i a l commitment t o d a t a c o l l e c t i o n and a n a l y s i s s u b s t a n t i a l l y l a r g e r than p r e s e n t l y undertaken by l o c a l m u n i c i p a l i t i e s or the GVRD. The v i a b i l i t y of such a p r o j e c t i s dependent upon e s t a b l i s h i n g a l o n g - t e r m commitment by p o l i t i c i a n s and government departments t o economic r e s e a r c h . At the p r e s e n t t i m e , m u n i c i p a l i t i e s i n the GVRD a r e u n w i l l i n g t o su p p o r t l a r g e - s c a l e s t u d i e s of the m e t r o p o l i t a n economy such as the i d e n t i f i c a t i o n of p r o p u l s i v e i n d u s t r i e s ( p e r s . com. Hugh K e l l a s GVRD-Development S e r v i c e s , 22/3/88). In s p i t e of the l i m i t a t i o n s d i s c u s s e d above, measuring the p r o p u l s i v e c h a r a c t e r i s t i c s of l o c a l i n d u s t r i e s p r o v i d e s i m p o r t a n t i n s i g h t s i n t o the ch a n g i n g s t r u c t u r e of urban economies and has im p o r t a n t i m p l i c a t i o n s f o r urban economic 1 32 p o l i c y . These implications are discussed in chapter 5. 133 V. THESIS CONCLUSIONS AND IMPLICATIONS FOR URBAN ECONOMIC POLICY The r o l e of i n d u s t r i e s and f i r m s i n p r o p e l l i n g economic growth and change i s an i m p o r t a n t i s s u e i n urban economic r e s e a r c h and p o l i c y . T h i s t h e s i s has a n a l y z e d the o p p o r t u n i t i e s and l i m i t s f o r i d e n t i f y i n g p r o p u l s i v e i n d u s t r i e s i n advanced m e t r o p o l i t a n economies. Unprecedented s t r u c t u r a l and s p a t i a l change i n urban economies over the p a s t two decades has, i n many c i t i e s , l e d t o i n c r e a s e d unemployment, p o v e r t y , abandoned b u i l d i n g s and i n f r a s t r u c t u r e , and a r e d u c t i o n i n the l o c a l t a x base o f t e n accompanied by a f i s c a l c r i s i s i n c e n t r a l c i t y a r e a s . A s e r i e s of weak r e c e s s i o n s and r e c o v e r i e s d u r i n g the 1970s and a major r e c e s s i o n i n 1981-83 have worsened the n e g a t i v e consequences of s t r u c t u r a l economic change i n many c i t i e s . Urban economic p o l i c y i s a r e l a t i v e l y r e c e n t a c t i v i t y t h a t has a r i s e n i n response t o the n e g a t i v e consequences of s t r u c t u r a l economic change. L o c a l governments a r e i n t e r v e n i n g i n p a r t because of the inadequacy of macroeconomic and r e g i o n a l development p o l i c i e s i n i t i a t e d by s e n i o r governments. Urban economic programs have i n c r e a s e d s i g n i f i c a n t l y i n d i v e r s i t y and c o m p l e x i t y d u r i n g the 1980s. In p a r t i c u l a r , t h e r e i s growing i n t e r e s t and p r e s s u r e t o i d e n t i f y and support l o c a l p r o p u l s i v e i n d u s t r i e s i n o r d e r t o i n c r e a s e l o c a l employment and income. The n e g a t i v e e f f e c t s of s t r u c t u r a l change i n Canadian c i t i e s a r e not a t p r e s e n t c r i t i c a l or n e c e s s a r i l y i r r e v e r s i b l e . The Canadian economy i s c u r r e n t l y e x p e r i e n c i n g s t r o n g growth a l t h o u g h the r e c o v e r y from the 1981-1984 r e c e s s i o n has been 134 s l o w e r i n w e s t e r n Canada. There a r e good o p p o r t u n i t i e s a t p r e s e n t f o r p r o - a c t i v e r e s e a r c h and urban economic p o l i c y m a k i n g . I t i s t h e r e f o r e t i m e l y t o r e f l e c t on r e c e n t e x p e r i e n c e s and i n s i g h t s i n urban economic r e s e a r c h and p o l i c y . T h i s a n a l y s i s of the o p p o r t u n i t i e s and l i m i t s f o r i d e n t i f y i n g l o c a l p r o p u l s i v e i n d u s t r i e s has i n v o l v e d a c r i t i c a l r e v i e w of c o n c e p t s and d a t a from urban, r e g i o n a l and i n d u s t i a l economic r e s e a r c h . C r i t e r i a f o r i d e n t i f y i n g p r o p u l s i v e i n d u s t r i e s were f o r m u l a t e d u s i n g e x i s t i n g q u a n t i t a t i v e measures of i n d u s t r y c h a r a c t e r i s t i c s and i n s i g h t s i n t o the p r o p u l s i v e r e l a t i o n s h i p s between s p e c i f i c i n d u s t r y c h a r a c t e r i s t i c s and urban economic growth and change. The e f f i c a c y of u s i n g e x i s t i n g d a t a t o i d e n t i f y p r o p u l s i v e i n d u s t r i e s i n m e t r o p o l i t a n Vancouver, B r i t i s h Columbia was examined. T h i s c h a p t e r d i s c u s s e s t h e s i s f i n d i n g s on the o p p o r t u n i t i e s and l i m i t s f o r i d e n t i f y i n g l o c a l p r o p u l s i v e i n d u s t r i e s and the i m p l i c a t i o n s of i d e n t i f y i n g p r o p u l s i v e i n d u s t r i e s f o r urban economic p o l i c y . 5.1 The O p p o r t u n i t i e s And L i m i t s In I d e n t i f y i n g L o c a l P r o p u l s i v e  I n d u s t r i e s A s y n t h e s i s of urban, r e g i o n a l and i n d u s t r i a l economic r e s e a r c h has p r o v i d e d i m p o r t a n t i n s i g h t s i n t o the c h a r a c t e r i s t i c s of i n d u s t r i e s which p r o p e l urban economic growth and change. These i n s i g h t s were used t o f o r m u l a t e n i n e c r i t e r i a f o r i d e n t i f y i n g l o c a l p r o p u l s i v e i n d u s t r i e s . The s u c c e s s i n f o r m u l a t i n g c r i t e r i a i s s h a r p l y c o n t r a s t e d by the inadequacy of a v a i l a b l e d a t a a t the m e t r o p o l i t a n l e v e l . A v a i l a b l e d a t a a r e 135 inadequate f o r i d e n t i f y i n g p r o p u l s i v e i n d u s t r i e s i n m e t r o p o l i t a n Vancouver. T h e s i s f i n d i n g s on the o p p o r t u n i t i e s and l i m i t s i n f o r m u l a t i n g c r i t e r i a and u s i n g a v a i l a b l e d a t a t o i d e n t i f y p r o p u l s i v e i n d u s t r i e s i n Vancouver a r e d i s c u s s e d b r i e f l y below. The f i r s t s t e p i n i d e n t i f y i n g l o c a l p r o p u l s i v e i n d u s t r i e s i s t o d e s c r i b e i n d u s t r y c h a r a c t e r i s t i c s which i n f l u e n c e urban economic growth and change. T h i s was a c c o m p l i s h e d u s i n g a s y n t h e s i s of c o n c e p t s and o b s e r v a t i o n s from u r b a n , r e g i o n a l and i n d u s t r i a l economic r e s e a r c h . There a r e two b a s i c k i n d s of p r o p u l s i v e c h a r a c t e r i s t i c s : p r o p u l s i v e mechanisms and economic f a c t o r s which cause p r o p u l s i v e mechanisms t o change over t i m e . P r o p u l s i v e mechanisms a r e i n d u s t r y c h a r a c t e r i s t i c s which d i r e c t l y s t i m u l a t e urban employment and income growth. I n d u s t r y s i z e , growth and the s t r e n g t h and d i v e r s i t y of l o c a l i n t e r -i n d u s t r y l i n k a g e s a r e p r o p u l s i v e mechanisms which i n f l u e n c e o v e r a l l urban income and employment growth. The d i s t r i b u t i o n of income and employment w i t h i n urban p o p u l a t i o n s i s i n f l u e n c e d by worker e a r n i n g s and the o c c u p a t i o n a l r e q u i r e m e n t s of l o c a l i n d u s t r i e s . The second type of p r o p u l s i v e c h a r a c t e r i s t i c i n v o l v e s economic f a c t o r s which cause p r o p u l s i v e mechanisms t o change over t i m e . Change i s a fundamental component of the p r o p u l s i v e e f f e c t s which i n d u s t r i e s e x e r t on urban economies. Four economic f a c t o r s which s t i m u l a t e changes i n the p r o p u l s i v e c h a r a c t e r i s t i c s of i n d u s t r i e s over the s h o r t t o l o n g run a r e t e c h n o l o g i c a l i n n o v a t i o n , market o r i e n t a t i o n , s e n s i t i v i t y t o the b u s i n e s s c y c l e and o l i g o p o l y . Economic r e s e a r c h e r s m a i n t a i n a 136 c a u t i o u s approach i n s t a t i n g the c a u s a l r e l a t i o n s h i p s between each f a c t o r and i n d u s t r y growth and change. T h i s i s an i n d i c a t o r of the s i g n i f i c a n t c h a l l e n g e s i n v o l v e d i n u n d e r s t a n d i n g the economic f o r c e s which s t i m u l a t e i n d u s t r i e s to. grow and change over the s h o r t t o l o n g r u n. There a r e two r e q u i r e m e n t s i n f o r m u l a t i n g c r i t e r i a f o r i d e n t i f y i n g p r o p u l s i v e i n d u s t r i e s . The f i r s t i s a s e t of q u a n t i t a t i v e measures of the p r o p u l s i v e c h a r a c t e r i s t i c s of i n d u s t r i e s . The second i s a s e t of g u i d e l i n e s d e s c r i b i n g the p r o p u l s i v e r e l a t i o n s h i p between each i n d u s t r y c h a r a c t e r i s t i c and urban economic growth and change. These g u i d e l i n e s a r e used t o e v a l u a t e measurements of the p r o p u l s i v e c h a r a c t e r i s t i c s of l o c a l i n d u s t r i e s . In c h a p t e r 3 n i n e i n d u s t r y c h a r a c t e r i s t i c s were e x p r e s s e d as c r i t e r i a f o r i d e n t i f y i n g l o c a l p r o p u l s i v e i n d u s t r i e s ( i n d u s t r y s i z e , growth performance, average worker e a r n i n g s , employment e a r n i n g s p r o f i l e , m u l t i p l i e r performance, e x p o r t o r i e n t a t i o n , v u l n e r a b i l i t y t o import p e n e t r a t i o n of domestic m a r k e t s , and s e n s i t i v i t y t o economic economic r e c e s s i o n and e x p a n s i o n ) . Two a d d i t i o n a l i n d u s t r y c h a r a c t e r i s t i c s , i n n o v a t i o n i n t e n s i t y and match of o c c u p a t i o n a l demand w i t h l o c a l unemployment, cannot be used as c r i t e r i a because of inadequate q u a n t i t a t i v e measures. The r e l a t i o n s h i p s between t e c h n o l o g i c a l i n n o v a t i o n and i n d u s t r y growth and change have been the s u b j e c t of s u b s t a n t i a l r e s e a r c h over the p a s t f o u r decades. T h i s r e s e a r c h has so f a r f a i l e d t o come up w i t h a s a t i s f a c t o r y d e f i n i t i o n of t e c h n o l o g i c a l i n n o v a t i o n or a measure which 1 37 a d d r e s s e s a broader range of n o n - r o u t i n e p r o d u c t i o n a c t i v i t i e s r a t h e r than f o c u s i n g on r e s e a r c h and development i n t e n s i t y . A t h i r d i n d u s t r y c h a r a c t e r i s t i c , i n d u s t r y c o n c e n t r a t i o n , cannot be used as a c r i t e r i o n because of u n c e r t a i n t y i n the p r o p u l s i v e r e l a t i o n s h i p between o l i g o p o l y and i n d u s t r y growth and change over the l o n g r u n . The l i n k between i n d u s t r y c o n c e n t r a t i o n and urban economic growth and change remains an i m p o r t a n t r e s e a r c h i s s u e . The c r i t e r i a proposed i n t h i s t h e s i s a r e not a f u l l y d e t e r m i n a t e and comprehensive s p e c i f i c a t i o n of the p r o p u l s i v e c h a r a c t e r i s t i c s of i n d u s t r i e s . Rather the proposed c r i t e r i a r e f l e c t e x i s t i n g c o n c e p t s , g u i d e l i n e s and q u a n t i t a t i v e measures and are p r e s e n t e d w i t h a view t o f o s t e r i n g i n c r e a s e d d i a l o g u e on the o p p o r t u n i t i e s and l i m i t s f o r i d e n t i f y i n g p r o p u l s i v e i n d u s t r i e s i n advanced m e t r o p o l i t a n economies. The e v i d e n c e i n c h a p t e r 4 shows t h a t the a v a i l a b l e d a t a a r e i n adequate f o r i d e n t i f y i n g p r o p u l s i v e i n d u s t r i e s i n m e t r o p o l i t a n Vancouver. Data on m e t r o p o l i t a n Vancouver i n d u s t r i e s a r e a v a i l a b l e f o r f i v e out of n i n e c r i t i e r i a : i n d u s t r y s i z e , growth performance, average wages, and s e n s i t i v i t y t o r e c e s s i o n and e x p a n s i o n ) . I n c l u d i n g the f o u r r e m a i n i n g c r i t e r i a (employment e a r n i n g s p r o f i l e s , m u l t i p l i e r performance, e x p o r t o r i e n t a t i o n and v u l n e r a b i l i t y t o i m p o r t s ) i n an i d e n t i f i c a t i o n of l o c a l p r o p u l s i v e i n d u s t r i e s w i l l r e q u i r e a s i g n i f i c a n t l y g r e a t e r commitment by l o c a l p o l i c y m a k e r s t o d a t a c o l l e c t i o n and a n a l y s i s . There i s a c r i t i c a l need f o r i n c r e a s e d r e s e a r c h on the c h a n g i n g s t r u c t u r e of urban economies and i n p a r t i c u l a r , 138 i d e n t i f y i n g and m o n i t o r i n g l o c a l p r o p u l s i v e i n d u s t r i e s . At a minimum, l o c a l p o l i c y m a k e r s need t o update i n f o r m a t i o n on l o c a l i n d u s t r y employment and s a l e s m u l t i p l i e r s which have not been e s t i m a t e d s i n c e 1971. George (1983), Watson (1984) and the Macdonald R o y a l Commission (1985 v.2. ch.9) a r e c r i t i c a l of economic and i n d u s t r i a l growth s t r a t e g i e s which t a r g e t s u p p o r t t o s p e c i f i c i n d u s t r i e s and f i r m s i n c a s e s i n which t h e r e i s a l a c k of consensus on a p p r o p r i a t e c r i t e r i a ; a l a c k of d a t a f o r i d e n t i f y i n g p r o p u l s i v e i n d u s t r i e s ; and a slow response of government a g e n c i e s and p o l i c i e s t o changes i n economic s t r u c t u r e . A l t h o u g h t h e s e c r i t i c i s m s a r e d i r e c t e d l a r g e l y a t f e d e r a l i n s t i t u t i o n s and p o l i c i e s , they are e q u a l l y a p p l i c a b l e t o urban economic growth s t a t e g i e s . Urban economic p o l i c y m a k e r s need t o use a more a n a l y t i c a l  and comprehensive approach f o r i d e n t i f y i n g p r o p u l s i v e i n d u s t r i e s  r a t h e r than r e l y i n g on growth performance. E x i s t i n g methods f o r i d e n t i f y i n g p r o p u l s i v e i n d u s t r i e s ( o f t e n c a l l e d " s u n r i s e " i n d u s t r i e s or "winners") a r e based on i n d u s t r y s i z e and growth performance and t h i s approach i s i n a d e q u a t e . For example, George ( 1983 p.7) d e f i n e s a w i n n i n g i n d u s t r y as a h i g h growth i n d u s t r y . The i d e n t i f i c a t i o n of c r i t i c a l s e c t o r s i n Vancouver's economic s t r a t e g y (1982) i s based on s i z e , growth performance and p o t e n t i a l , and i n t u i t i v e i n s i g h t s i n t o the s t r e n g t h and d i v e r s i t y of l o c a l i n t e r - i n d u s t r y l i n k a g e s ( p e r s . com. T. Hutton 10/87). T o r o n t o ' s economic growth s t r a t e g y (1980 p.46) recommends p u b l i c s u p port f o r i n d i g e n o u s s e c t o r s w i t h s t r o n g 139 growth p o t e n t i a l . Growth p o t e n t i a l i s , however, o n l y one c h a r a c t e r i s t i c of a p r o p u l s i v e i n d u s t r y . T h i s t h e s i s has p r o v i d e d c o n s i d e r a b l e i n s i g h t s i n t o the p r o p u l s i v e c h a r a c t e r i s t i c s of i n d u s t r i e s . A more comprehensive and a n a l y t i c a l approach f o r i d e n t i f y i n g l o c a l p r o p u l s i v e i n d u s t r i e s u s i n g n i n e c r i t e r i a i s proposed. T h i s approach would p r o v i d e a more comprehensive u n d e r s t a n d i n g of how l o c a l i n d u s t r i e s i n f l u e n c e urban employment and income growth a t p r e s e n t , and i n s i g h t i n t o the ways t h a t the p r o p u l s i v e c a p a c i t i e s of l o c a l i n d u s t r i e s a re l i k e l y t o change over the s h o r t t o l o n g r u n. The l a c k of adequate i n f o r m a t i o n on l o c a l p r o p u l s i v e i n d u s t r i e s i s a fundamental o b s t a c l e t o i m p r o v i n g the e f f i c a c y of urban economic growth s t r a t e g i e s and t h i s i s s u e i s a d d r e s s e d i n the next s e c t i o n . 5.2 The I m p l i c a t i o n s Of I d e n t i f y i n g P r o p u l s i v e I n d u s t r i e s For  Urban Economic P o l i c y T h i s s e c t i o n d i s c u s s e s the i m p l i c a t i o n s of i d e n t i f y i n g p r o p u l s i v e i n d u s t r i e s f o r urban economic p o l i c y . The d i s c u s s i o n of p o l i c y i m p l i c a t i o n s r e l a t e s s p e c i f i c a l l y t o the a c t i o n s t a k e n by m u n i c i p a l and m e t r o p o l i t a n governments t o i n c r e a s e employment, income and the t a x base (GVRD 1987 p.4; C i t y of Vancouver 1982 p.1; C i t y of T o r o n t o 1980 p . l ; Township of Richmond 1986 p . 1 ) . Urban economic p o l i c y i s a response t o i n c r e a s e d unemployment and e r o s i o n of the l o c a l t a x base brought on by s t r u c t u r a l economic change. In t h i s t h e s i s i t has not been p o s s i b l e t o i d e n t i f y p r o p u l s i v e i n d u s t r i e s i n m e t r o p o l i t a n 1 40 Vancouver. I d e n t i f y i n g p r o p u l s i v e i n d u s t r i e s has i m p o r t a n t i m p l i c a t i o n s f o r urban economic p o l i c y and t h e s e i m p l i c a t i o n s a r e d i s c u s s e d below. There a r e two fundamental l e v e l s of d e c i s i o n m a k i n g i n v o l v e d i n f o r m u l a t i n g and implementing urban economic growth p o l i c i e s . The s t r a t e g i c l e v e l p r o v i d e s an o v e r a l l approach or framework f o r g u i d i n g p o l i c y a c t i o n s . Two key elements of a s t r a t e g i c framework a r e : c o n c e p t u a l and e m p i r i c a l i s s u e s and i n s i g h t s r e l a t i n g t o urban economic growth and change; and the g o a l s and o b j e c t i v e s of l o c a l p o l i c y m a k e r s ( C i t y of Vancouver 1985c p . 2 ) . The program l e v e l of p o l i c y d e c i s i o n m a k i n g i s made up of the s p e c i f i c a c t i o n s t a k e n t o i n f l u e n c e the growth of employment, income and the t a x base. I t i s a t the s t r a t e g i c l e v e l of p o l i c y m a k i n g t h a t i d e n t i f y i n g p r o p u l s i v e i n d u s t r i e s has im p o r t a n t i m p l i c a t i o n s f o r urban economic p o l i c y . I n f o r m a t i o n on l o c a l p r o p u l s i v e i n d u s t r i e s can be used by l o c a l p o l i c y m a k e r s t o f o r m u l a t e and/or s e t p r i o r i t i e s among an i n c r e a s i n g l y complex and d i v e r s e a r r a y of economic growth programs; e v a l u a t e the e f f i c a c y of implemented programs; and mo n i t o r and e v a l u a t e changes i n urban economic s t r u c t u r e . Urban economic p o l i c y m a k e r s employ a wide range of d i r e c t and i n d i r e c t programs t o s t i m u l a t e l o c a l income and employment growth. These programs i n c l u d e ( i n f r a s t r u c t u r e and s e r v i c e s , m a r k e t i n g and p r o m o t i o n , p r o v i d i n g f i n a n c i a l s u p p o r t t o e x i s t i n g and incoming i n d u s t r i e s , e nhancing i n v e s t m e n t s i n human c a p i t a l and e n c o u r a g i n g l o c a l t e c h n o l o g i c a l i n n o v a t i o n ) . L o c a l p o l i c y m a k e r s may w i s h t o t a r g e t i n d i r e c t and d i r e c t programs t o h e l p key 141 l o c a l i n d u s t r i e s most l i k e l y t o s t i m u l a t e income and employment growth or t r y t o enhance the p r o p u l s i v e c a p a b i l i t e s of weaker l o c a l i n d u s t r i e s . L o c a l economic p o l i c y m a k e r s can g a i n i m p o r t a n t i n s i g h t s i n t o economic f o r c e s and t r e n d s which s t i m u l a t e s t r u c t u r a l change i n urban economies by i d e n t i f y i n g and m o n i t o r i n g the p r o p u l s i v e c h a r a c t e r i s t i c s of l o c a l i n d u s t r i e s . One example of the r o l e of i d e n t i f y i n g l o c a l p r o p u l s i v e i n d u s t r i e s i n urban economic p o l i c y i s i n m o n i t o r i n g and e v a l u a t i n g the impacts of the proposed f r e e t r a d e agreeement w i t h the U.S. The proposed f r e e t r a d e agreement w i t h the U n i t e d S t a t e s w i l l have i m p o r t a n t e f f e c t s on the s t r u c t u r e of Canada's urban economies. There e x i s t s c o n s i d e r a b l e u n c e r t a i n t y i n p r e d i c t i n g the e f f e c t s of f r e e t r a d e on Canadian i n d u s t r i e s . F r e e t r a d e w i t h the U.S. i s e x p e c t e d t o "add s i g n i f i c a n t l y t o economic growth, • incomes and employment i n Canada" (Dept. E x t e r n a l A f f a i r s 1987b p . 1 ) . The Economic C o u n c i l of Canada s u g g e s t s t h a t f r e e t r a d e c o u l d c r e a t e up t o 350,000 j o b s by 1995 (Dept. E x t e r n a l A f f a i r s 1987a p.28). In c o n t r a s t , a study by the B.C. F e d e r a t i o n of Labour s u g g e s t s t h a t 56730 workers i n B.C. would l o s e t h e i r j o b s under a f u l l y implemented f r e e t r a d e agreement (Vancouver Sun 4/2/88 p . c 5 ) . W h i l e the f e d e r a l and B.C. governments e x p e c t f r e e t r a d e t o s t i m u l a t e a net i n c r e a s e i n employment, t h e r e i s r e c o g n i t i o n t h a t some i n d u s t r i e s w i l l be unable t o compete w i t h p r o d u c t s from the U n i t e d S t a t e s (Vancouver Sun 27/5/86 p . b l ; Vancouver Sun 3/3/88). Both l e v e l s of government have made a commitment 142 t o h e l p a d v e r s e l y a f f e c t e d i n d u s t r i e s t o r a t i o n a l i z e and r e s t r u c t u r e , and t o h e l p workers move from d e c l i n i n g t o growing i n d u s t r i e s (Dept. E x t e r n a l A f f a i r s 1987b p.27; B.C. M i n . Econ. Dev. 1987 p . 4 ) . The p o s i t i v e and n e g a t i v e e f f e c t s of f r e e t r a d e a r e u n l i k e l y t o be d i s t r i b u t e d e v e n l y among c i t i e s such as T o r o n t o , Vancouver and M o n t r e a l because of the unique mix of i n d u s t r i e s which makes up each c i t y . Urban economic p o l i c y m a k e r s need t o p a r t i c i p a t e i n the p o l i c y debate and i m p l e m e n t a t i o n i n v o l v i n g f r e e t r a d e because changes i n the s t r u c t u r e of Canadian i n d u s t r i e s w i l l r e s u l t i n changes i n employment, income and the ta x base i n urban economies. M o n i t o r i n g changes i n the p r o p u l s i v e c h a r a c t e r i s t i c s of l o c a l i n d u s t r i e s w i l l g i v e l o c a l p o l i c y m a k e r s the i n f o r m a t i o n they need t o p a r t i c i p a t e w i t h s e n i o r government i n f o r m u l a t i n g and implementing programs t o f a c i l i t a t e a djustment t o f r e e t r a d e . L o c a l p o l i c y m a k e r s need t o use a more comprehensive approach i n i d e n t i f y i n g p r o p u l s i v e i n d u s t r i e s r a t h e r than an o v e r l y r e s t r i c t i v e f o c u s on m a n u f a c t u r i n g . The d i s t i n c t i o n between b a s i c and induced economic a c t i v i t i e s t r a d i t i o n a l l y a s s o c i a t e d w i t h m a n u f a c t u r i n g and s e r v i c e i n d u s t r i e s r e s p e c t i v e l y i s i n c r e a s i n g l y i r r e l e v a n t due t o the growing i n t e r d e p e n d e n c e of goods and s e r v i c e s p r o d u c i n g i n d u s t r i e s , t h e s i g n i f i c a n t r o l e of s e r v i c e s i n urban economic growth, and i n view of the e x p o r t o r i e n t a t i o n of c e r t a i n s e r v i c e i n d u s t r i e s as d i s c u s s e d b r i e f l y below. Economic base t h e o r y has p l a y e d a dominant r o l e i n economic 143 growth s t r a t e g i e s a t the urban, p r o v i n c i a l and n a t i o n a l l e v e l s . Economic p o l i c y a n a l y s t s have o f t e n used t h i s t h e o r y t o argue t h a t m a n u f a c t u r i n g i n d u s t r i e s a r e the p r i n c i p a l s o u r c e of economic growth f o r c i t i e s and r e g i o n s . R i e f f l e r (1976 p.101) argues t h a t s t i m u l a t i n g the growth of s e r v i c e i n d u s t r i e s i s not i n g e n e r a l an e f f e c t i v e means of c r e a t i n g r e g i o n a l economic growth. In h i s view, s e r v i c e i n d u s t r y growth i s dependent on the growth of r e g i o n a l m a rkets. The C i t y of T o r o n t o ' s economic s t r a t e g y (1980 p.54) makes use of economic base t h e o r y i n c h o o s i n g t o d i r e c t p u b l i c support p r i m a r i l y t o m a n u f a c t u r i n g . Economic base t h e o r y s t a t e s t h a t e x p o r t s a r e the p r i n c i p a l engine of economic growth but does not suggest t h a t e x p o r t a c t i v i t y i s r e s t r i c t e d t o m a n u f a c t u r i n g i n d u s t r i e s . The growing e x p o r t o r i e n t a t i o n of producer s e r v i c e s i s e v i d e n c e of the inadequacy of urban economic s t r a t e g i e s which i d e n t i f y m a n u f a c t u r i n g i n d u s t r i e s as the p r i n c i p a l s o u r c e of economic growth. Recent e v i d e n c e p r o v i d e d by Ley and Hutton (1987) s u g g e s t s t h a t economic growth i n Vancouver i s becoming l e s s dependent on t r a d i t i o n a l r e s o u r c e based i n d u s t r i e s , which have dominated B.C.'s economy, i n p a r t due t o i n c r e a s i n g e x p o r t s of pro d u c e r s e r v i c e s . Economic base t h e o r y i s not an adequate or a p p r o p r i a t e guide f o r f o r m u l a t i n g and implementing an urban economic growth s t a t e g y . The t h e o r y ' s " a p p r o p r i a t e a p p l i c a t i o n s a r e r e s t r i c t e d t o a n a l y s e s of s h o r t - r u n economic impacts on s m a l l - s c a l e , s i n g l e - e x p o r t economies" ( D a v i s 1983 p.23). M a n u f a c t u r i n g and s e r v i c e i n d u s t r i e s a r e i n t e r - d e p e n d e n t i n advanced m e t r o p o l i t a n 144 economies ( H i r s c h h o r n 1979). W i t h the development of g e n e r a l e q u i l i b r i u m a n a l y s i s , the ( e s s e n t i a l l y p h y s i o c r a t i c ) n o t i o n t h a t an economy can be d i v i d e d i n t o c o r e and s u r p l u s p r o d u c i n g s e c t o r s has been r e l e g a t e d t o the h i s t o r y of economic d o c t r i n e , f o r i t would be j u s t as t r u e t o say t h a t w i t h o u t l a w y e r s , d o c t o r s and s t o c k b r o k e r s t o buy them, t h e r e would be no market f o r most manufactured goods (Watson 1984 p.203). A key element of any urban economic s t r a t e g y must be an expanded view of p r o p u l s i v e i n d u s t r i e s . ... T o r o n t o has the o p p o r t u n i t y t o t a k e major new i n d u s t r i a l i n i t i a t i v e s i n the new f u t u r e . A more contemporary view of " i n d u s t r y " must be a t the c o r e of any new approach, however, and T o r o n t o has t o r e c o g n i z e t h a t i n d u s t r y i s c o mprised of an ever i n c r e a s i n g v a r i e t y of o f f i c e s , s t u d i o s , workshops and l a b o r a t o r i e s as w e l l as f a c t o r i e s ( B r i t t o n 1981 p.32). There i s no a p r i o r i reason t o assume t h a t m a n u f a c t u r i n g i n d u s t r i e s a r e unique i n terms of the a b i l i t y t o s t i m u l a t e economic growth (George 1983 p.70). M a n u f a c t u r i n g i n d u s t r i e s have t r a d i t i o n a l l y p r o v i d e d an i m p o r t a n t source of urban employment and an e s s e n t i a l component of the urban t a x base. In advanced m e t r o p o l i t a n economies, however, s e r v i c e i n d u s t r i e s have demonstrated s u p e r i o r p r o p u l s i v e performance and t h i s view needs t o be i n t e g r a t e d more f u l l y i n t o urban economic r e s e a r c h a c t i v i t i e s and p o l i c y . A more b a l a n c e d approach t o s u p p o r t i n g s e r v i c e and m a n u f a c t u r i n g i n d u s t r i e s i s e v i d e n t i n the C i t y of Vancouver's economic growth p o l i c i e s (1982, I 9 8 5 b c ) . S e r v i c e s a r e viewed as the p r i m a r y p r o p u l s i v e i n d u s t r i e s i n Vancouver and economic growth programs p r o v i d e b o t h i n d i r e c t and d i r e c t s u p p o r t f o r t h e s e key p r o p u l s i v e a c t i v i t i e s . In Vancouver, m a n u f a c t u r i n g 145 c o n t i n u e s t o p r o v i d e an i m p o r t a n t source of employment and t a x revenues. W h i l e the p r o s p e c t s f o r employment growth i n m a n u f a c t u r i n g a r e not s t r o n g , t h e r e e x i s t i m p o r t a n t o p p o r t u n i t i e s f o r f o s t e r i n g growth s e l e c t i v e l y i n m a n u f a c t u r i n g i n d u s t r i e s , or a t a minimum, e n s u r i n g t h a t economic and land-use programs do not has t e n the d e c l i n e of l o c a l m a n u f a c t u r i n g . Urban economic r e s e a r c h e r s and polcymakers know even l e s s about the p r o p u l s i v e c h a r a c t e r i s t i c s of s e r v i c e s than m a n u f a c t u r i n g . There i s a v i t a l need f o r i n c r e a s e d r e s e a r c h i n t o the n a t u r e of i n t e r - i n d u s t r y l i n k a g e s , i n n o v a t i o n , market o r i e n t a t i o n and s t r u c t u r e of s e r v i c e i n d u s t r i e s i n advanced m e t r o p o l i t a n economies (see a l s o H i r s c h h o r n 1979; Hutt o n and Ley 1987, and Ley and Hutton 1987). The l i m i t e d budgets and a r e a l j u r i s d i c t i o n of m u n i c i p a l governments s u g g e s t s t h a t i d e n t i f y i n g and m o n i t o r i n g l o c a l p r o p u l s i v e i n d u s t r i e s i s a r e s e a r c h a c t i v i t y more a p p r o p r i a t e f o r m e t r o p o l i t a n governments ( p e r s . com. P h i l Mondor, C i t y of Vancouver 21/3/88). Economic d a t a i s g e n e r a l l y much more a v a i l a b l e a t the f e d e r a l and p r o v i n c i a l l e v e l s than a t the m e t r o p o l i t a n l e v e l . The l a c k of d a t a a t the m e t r o p o l i t a n l e v e l has s i g n i f i c a n t l y c u r t a i l e d p o l i c y r e l e v a n t economic r e s e a r c h . Economic p o l i c y m a k e r s have by i n l a r g e o v e r l o o k e d the o p p o r t u n i t i e s f o r m e t r o p o l i t a n governments t o c o l l e c t p r i m a r y economic d a t a and p l a y a l a r g e r r o l e i n the economic growth s t r a t e g i e s of s e n i o r governments. C o l l e c t i n g p r i m a r y d a t a on p r o p u l s i v e i n d u s t r i e s i s r e l a t i v e l y e a s i e r a t the m e t r o p o l i t a n l e v e l than p r o v i n c i a l l y or n a t i o n a l l y because of the s m a l l e r 1 46 geo g r a p h i c a r e a , the s m a l l e r number of f i r m s t o sample, and t e c h n o l o g i c a l advances i n micro-computers which have reduced the c o s t of da t a s t o r a g e and. a n a l y s i s . However, c o n f i d e n t i a l i t y problems a s s o c i a t e d w i t h s m a l l e r sample s i z e s which may r e s t r i c t the a v a i l a b i l i t y of d a t a a t the m e t r o p o l i t a n l e v e l . The e f f i c a c y of economic r e s e a r c h and p o l i c y a t the m e t r o p o l i t a n l e v e l a r e dependent on a l o n g run commitment by p o l i t i c i a n s and l i n e a g e n c i e s . At p r e s e n t , t h e r e i s v e r y l i t t l e commitment t o economic r e s e a r c h a t the m e t r o p o l i t a n l e v e l i n Vancouver. For example, the GVRD has budgeted $45,000 f o r a m e t r o p o l i t a n economic s t r a t e g y ( p e r s . com. Hugh K e l l a s GVRD 22/3/88). W i t h o u t a s u b s t a n t i a l l y g r e a t e r commitment t o economic r e s e a r c h and m o n i t o r i n g , m e t r o p o l i t a n governments have poor p r o s p e c t s f o r implementing e f f e c t i v e economic s t r a t e g i e s and programs or f o r p a r t i c i p a t i n g i n the p o l i c y a c t i o n s of s e n i o r governments. An im p o r t a n t f i r s t s t e p f o r the GVRD i s t o undert a k e a f e a s i b i l i t y s t u d y which d e t e r m i n e s : the c o s t s of i d e n t i f y i n g and m o n i t o r i n g p r o p u l s i v e i n d u s t r i e s ; and the o p p o r t u n i t i e s f o r c o o p e r a t i v e r e s e a r c h w i t h s e n i o r governments, the p r i v a t e s e c t o r and l o c a l u n i v e r s i t i e s . M u n i c i p a l and m e t r o p o l i t a n governments have an i m p o r t a n t r o l e i n economic r e s e a r c h and p o l i c y based on t h e i r a c c o u n t a b i l i t y , r e s p o n s i v e n e s s and i n s i t u knowledge of the l o c a l economy. Not o n l y i s t h e r e g r e a t e r p r o p e n s i t y t o c o - o p e r a t e a t the l o c a l l e v e l , c o - o r d i n a t i o n of e f f o r t i s e a s i e r i n a s m a l l e r a r e a . M o n i t o r i n g r e s u l t s , c h anging d i r e c t i o n s , or s o l v i n g problems, can be a c c o m p l i s h e d more e a s i l y by a s m a l l group of peopl e d e a l i n g w i t h a moderate d a t a base and w i t h a g e n c i e s t h a t a r e w i t h i n 147 t h e i r own l o c a l c o n t r o l of i n f l u e n c e (Smith 1984 p . 4 ) . M e t r o p o l i t a n governments c o u l d p r o v i d e a v i t a l forum f o r economic r e s e a r c h and p o l i c y i n i t i a t i v e s i n v o l v i n g the i d e n t i f i c a t i o n and s u p p o r t of l o c a l p r o p u l s i v e i n d u s t r i e s . 1 48 BIBLIOGRAPHY 1. Abernathy, W. 1978. The P r o d u c t i v i t y Dilemma. Roadblock  t o I n n o v a t i o n i n the A u t o m o b i l e I n d u s t r y . B a l t i m o r e : Johns Hopkins U n i v . P r . 2. A b e r n a t h y , W. and J . U t t e r b a c k . 1978. " P a t t e r n s of I n d u s t r i a l I n n o v a t i o n . 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