Toronto: Innovation in a Megacity

The Toronto economy has experienced four eras of growth over the postwar period. The first was characterized by the rapid influx of foreign subsidiaries into southern Ontario and the expansion of the aerospace, auto and telecommunication sectors as government spending on educational, physical and social infrastructure. The second era, from the signing of the Auto Pact in 1965 to the Free Trade Agreement with the U.S. in 1988 was marked by an extension and deepening of those sectors which had taken hold in the earlier period, augmented by the flight of financial and business services from Montreal to Toronto. The third era witnessed a dramatic restructuring of the branch plant economy in the Toronto region, following the introduction of both the Canada-U.S. and North American Free Trade Agreements. The impact of this restructuring compounded the effects of the technological changes occurring from the mid-1980s onwards, leading to a loss of traditional manufacturing and clerical jobs and increasing income polarization in the city.

While some sectors, such as autos, aerospace and telecommunications, continued to expand in the late 1990s and early 2000s, the third era also saw the rapid expansion of the creative and cultural industries, including film, television, theatre, music, fashion, design and publishing, along with financial services. The period since the late 1990s has been labelled the Fourth Era in Toronto’s postwar economic growth. Dynamic sectors include information and communications technology (including new media), biomedical and biotechnology, fashion and design, aerospace and automotive, tourism and the cultural-creative industries. Noteworthy is the dense concentration of both ICT and financial services in the regional economy. Toronto benefits from the presence of a diversified regional economy that is contributing to its development as a ‘Schumpeterian hub’ of innovation and creativity. However, our understanding of the nature of the innovative process in these growing sectors is considerably less advanced than it is for more traditional manufacturing sectors. Similarly, there is a relative dearth of evidence on the extent and nature of knowledge flows across sectors in the creative and cultural industries, as well as in higher order business services. This paper draws on the results of several individual case studies conducted over the past six years in the Toronto region to analyze the way in which the which innovation and knowledge flows are contributing to the evolving structure of the knowledge economy in the region.