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WhenFlagshipsFalter:ComparingBlackBerryandNokia
DariusOrnstonMunkSchoolofGlobalAffairsDepartmentofPoliticalScience
1DevonshirePlaceTheUniversityofToronto
Toronto,ONM5S3K7,[email protected]
+1(647)308-9423*Paperpresentedtothe5thCreatingDigitalOpportunityconference,Vancouver,April24-27,2018.
2
Inrecentdecades,Waterloo1andFinlandhavebeenhailedashightechsuccess
stories,leapfroggingcompetitorstoassumeleadershipininformationandcommunication
technology(KravtsovaandRadosevic)markets.Flagshipfirms,BlackBerry2andNokia,
werecentraltothisprocess.Inadditiontogeneratingemploymentandtaxrevenue,the
twofirmspopularizedinnovation-basedcompetition,inspiredlocalentrepreneurs,
attractedinternationalinvestment,anddiffusedknowledgethroughoutthelocaleconomy
(Dahlmanetal.2006;Gillmor2012;MoenandLilja2005).Infact,thetworegionscouldbe
viewedasamodelofhowtosucceedinhigh-technologymarkets,asevidencedbythe
interestincreating“newBlackBerries”and“newNokias”(Ornston2018;Yakabuski2013).
ButFinlandandWaterlooalsorepresentacautionarytale,astheirdependenceon
flagshipfirmsincreasedtheirvulnerabilitytodisruptiveeconomicshocks.When
BlackBerryandNokiafalteredbetween2009and2013,theythreatenedtotaketheirlocal,
ICTindustriesdownwiththem.Intheend,itappearsthattheirdeclinewasnotadeath
sentence.BothFinlandandWaterloohavebenefitedfromaproliferationofnew,startups
(Best2014;Dingman2015).Inthelong-run,thismayresultinahealthier,more
sustainablehigh-technologyecosystem.Butthetransitionhasbeenarockyone,
particularlyforFinland,wherestartupshaveyettoapproachNokiainemploymentor
revenue(PajarinenandRouvinen2015).Nokia’sdeclinetransformedFinlandintooneof
theworst-performingcountriesintheEurozoneafter2008(Eurostat2016).Bycontrast,
Waterloo’sstarhasdimmedonlyslightlyinthewakeofBlackBerry’sdeclineandthe
1Inthispaper,WaterlooreferstotheRegionalMunicipalityofWaterloo,aregionofroughly500,000whichencompassesthecityofWaterloo,Kitchener,Cambridgeandsurroundingtownships.2FormerlyResearchinMotion.Forsimplicity,IusethenameBlackBerrythroughoutthepaper,evenwhenreferringtodevelopmentsbeforethecorporation’s2013rebranding.
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region’sICTindustryisarguablystrongerthanitwasduringBlackberry’speak(CBRE
2016).
WhywasWaterloosomuchmoreresilienttothedeclineofitsflagshipfirmthan
Finland?ThispaperattributesthedivergencenottothedifferencesbetweenBlackBerry
andNokia,whichwereinsignificant,butratherthewayinwhichtheseflagshipfirmswere
embeddedwithintheirlocalcommunity.WhileBlackBerryplayedanoutsizedroleinthe
Waterlooregion,itattractedfewpublicresourcesandmaintainedanaloofrelationship
withlocal,high-technologyenterprises.Bycontrast,Nokiawashighlyactivewithinthe
FinnishpolicymakingprocessandenmeshedwiththelocalICTecosystem.Effortsto
embedNokiawithinaregionalinnovationsystemshouldhaveanddiddeliversignificant
benefits,buttheyalsoincreasedFinland’svulnerabilitytodisruptiveeconomicshocks.By
contrast,Waterloo’sfailuretoengageBlackBerryresultedinamorediverseecosystem
whichwasrelativelyunaffectedbythefirm’sdecline.Thesetwocasestudiessuggestthat
whileintegratingenterpriseswithinthelocalcommunitycandeliversignificantbenefits,
theactofembeddinglarge,flagshipfirmsisalsofraughtwithrisk.
ThePromiseandPerilsofEmbeddingFlagshipFirms
Theperilsofintegrationarenotimmediatelyobvious.Theliteratureoneconomic
sociology,politicaleconomy,economicdevelopment,urbanstudiesandregional
innovationsystemsconsistentlyhighlightsthebenefitsof“embedding”firmswithina
densenetworkoflocalrelationships(Evans1995;Lundvall1992;O'Riain2004;Saxenian
1994).“Embedding”cantakeseveralforms.First,enterprisescanbeintegratedintothe
policymakingprocess,steeringtheallocationofpublicresourcesorassuming
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responsibilityforpolicyimplementation(HallandSoskice2001;Schienstockand
Hämäläinen2001).Second,thoseofamoreliberalpersuasionmightprivilegevoluntary
tieswithintheprivatesector.Marketcompetitionmayencouragefirmstostrikelong-term
partnershipswithcomponentsuppliers,serviceproviders,andendusers(Porter1990).
Finally,economicsociologistswouldarguethatbothpatternsofintegrationrelyoncultural
embeddinginwhichenterprisesareconnectedtotheirsurroundingcommunitybyshared
normsorvalues(Lundvall1992;WalshokandShragge2014).
Allthreeperspectivessuggestthatembeddingcanbenefitfirmsbyloweringcosts,
reducingrisk,andresolvingcollectiveactionprograms.Forexample,private-public
collaborationineducationcoulddelivertoasteadysupplyofaffordable,high-quality
humancapital(Barry2004).Alargesuppliernetworkcanlowercostsbyfacilitating
specializationandreducevulnerabilitytoeconomicdownturnsbyloweringcapitalcosts
(Steinbock2000).Finally,communicationamongfirms,suppliers,endusers,andthepublic
sectorcanfosterinnovation,providingtheenterprisewithacompetitiveadvantageoverits
rivals(Lundvall1992).
Moreimportantlyforthepurposesofthisessay,embeddingalsobenefitshost
communities.First,communitiescanreducetheriskofcapitalflightbyconnecting
enterprisestolocalresources.Relianceonregionaleducationalinstitutions,localresearch,
specializedsuppliers,andsupportingservicesincreasestheopportunitycostofrelocation
(ZhengandWarner2010).Totheextentthatcommunicationamongfirms,governments,
andcivicorganizationsfostersinnovation,itfurtherinoculatescommunitiesfromcost
competitionbyenablingfirmstocompeteonthebasisofnoveltyorquality(Storperand
Venables2004).
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Oncefirmsareanchoredwithinthecommunity,localstakeholderscanextract
concessionssuchashigherwagesortaxes.Theseconcessionsnotonlyensurethatthe
benefitsofgrowtharewidelydistributed,theyalsoenablecommunitiestoupgrade
investmentsinknowledge,humancapital,infrastructure,andsupportingservices
(WeisskoffandWolf1977).Often,asthecasesofBlackBerryandNokiaillustrate,
enterprisesvaluethesecollectivegoodsanddeliverthesebenefitsvoluntarily.Firmsoften
independentlyraisewages,fundlocaluniversities,orcontributetocommunity
developmentwithoutanyexternalpressure.Amongthesecollectivegoods,knowledge
spilloversdeservespecialmention.Notonlyareembeddedenterprisesmorelikelyto
innovateforreasonsmentionedabove,buttheseproductivity-enhancinginsightsaremore
likelytoreachotherenterprises,eitherdeliberatelyorunwittingly,whenconnectedby
densenetworks(Lundvall1992).3
Thebenefitsofembeddingareparticularlystarkwhenjuxtaposedtoan
independententerprisewithfewtiestothelocalcommunity.Inthese“enclaveeconomies”
(Singer1950),knowledgeisinternalizedwithinthefirmorredirectedoutsideofthe
community.Thesecorporationsarelesslikelytoreinvestprofitslocally,moresensitiveto
costcompetition,andmorelikelytorespondwithcapitalflight.Asaresult,embeddingis
widelyportrayedasbestpracticeinliteraturesonFDIpromotion,innovationpolicy,and
urbandevelopment.
Thebenefitsofintegrationappearparticularlylucrativewhentheyanchorlarge,
“flagship”firms,suchasBlackBerryorNokia.Inadditiontotheirdirectimpacton
employment,largeenterprisesaregenerallymoreproductivethantheirsmaller
3 Assuminglocalenterprisespossesstheabsorptivecapacitytoprocessandexploitthisknowledge.
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counterparts(VanArkandMonnikhof1996).Thesehigh-productivityfirmscaninturn
upgradethecapacityoftheirlocalpartners,orknowledgemaydiffusethroughspinoffsor
labormarketmobility(Maliranta2000:69;Paija2000).Flagshipenterprisesalsooperate
atascalethatenablesthemtocontributetocollectivegoodssuchasinfrastructure,human
capital,knowledgecreation,andevencommunitydevelopment.Tociteoneexamplefrom
Waterloo,
ThethingthatImissthemostabout[BlackBerry]isitsimpactonthecommunitybroadlydefined.Soyoucouldgoto[BlackBerry]andsaywe’rebuilding“X,”anewlibraryoranewfacility….Regionalgovernmentscouldcallon[BlackBerry]todostuffbehindthescenes,tobringaregionalairlinetotheairport….OrUnitedWayisstrugglingand[BlackBerry]coulddoatopup.That’sonethingwemiss,there’snobigcompanythathascomeinandcantakecareofthecommunityinthatway.Youmayhavethesamenumberofpeopleemployedandthesameeconomicactivity,butyoudon’thavethatanchor(Interviewwithformerventurecapitalist,23November,2017,Waterloo,Canada).
InthecaseofFinlandandWaterloo,flagshipenterprisesestablishedaregionalreputation.
Byplacingtheseregions“onthemap”ashigh-technologyhubs,BlackBerryandNokiagave
other,high-technologyenterprisesgreatercredibilityinapproachinginvestorsandclients
(Gillmor2012;Steinbock2000).
Whilethebenefitsofembeddingareformidable,integrationintothelocal
communityisnotunambiguouslypositive.Ina1993study,GernotGrabherillustrateshow
strongtieswithintheGermansteelindustryincreasedtheRuhrregion’svulnerabilityto
disruptiveeconomicshocksthroughfunctional,political,andcognitivelock-in(Grabher
1993).Thispaperhypothesizesthattheserisksareespeciallypronouncedforflagship
firms.Largeenterprisesaremorelikelythantheirsmallandmedium-sizedenterprisesto
contributetofunctionallock-inbyintegratinglocalenterprisesintoasinglesupplier
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network.Verylargefirmsaremorelikelytocapturethepolicymakingprocess,reorienting
publicresourcesaroundtheirstrategicgoals.Finally,theseenterprisesaremorelikelyto
dominatethepublicconsciousness,contributingtocognitivelock-in.Ifcorrect,this
hypothesissuggestsamorenuancedunderstandingofindustrialembeddingandflagship
firms.Whileeffortstointegrateenterprisesintothelocalcommunitycandeliversignificant
benefits,theintegrationofverylargefirmsisfraughtwithperil.Bythesametoken,regions
mayprovesurprisinglyresilienttothedeclineofaflagshipfirmwhenitisnotwell-
connectedtothelocalcommunity.
WhenFlagshipsFalter:ComparingFinlandandWaterloo
Totestthishypothesis,thispapercomparestheriseandfalloftwoflagshipfirms,
BlackBerryandNokia,usingamostsimilarsystemsresearchdesign.BothBlackBerryand
Nokiaenteredmobilecommunicationsduringthe1990s,relyingonmobiledevicesto
successfullynavigatethedotcomcrashattheturnofthemillennium.Attheirheightin
2008,Nokiawasresponsiblefor40%ofglobalsmartphonesalesandBlackBerry
commandeda20%marketshare(Gartner2009;PajarinenandRouvinen2013;Sher
2013).NeitherfirmanticipatedthedisruptiveimpactofApple’siPhone.Withinadecade,
bothenterpriseshadshedthreequartersoftheirworkforce,retreatingtomorespecialized
nichessuchasembeddedsecurity(BlackBerry)andnetworkequipment(Nokia)(Pender
2015;YLE2016).
BothBlackBerryandNokiadominatedtheirlocalcommunities.Duringthe1970s,
WaterlooandFinlandreliedprincipallycontinentalEuropean-style,medium-technology
engineering.WhileFinlandwasmoredependentonnaturalresourcesandWaterloowasa
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centerforinsurance,neitherregionwascharacterizedbymeaningfulICTproduction.High-
technologyenterprisessuchasWatcom(Waterloo)orWaisala(Finland)werethe
exceptionratherthantherule(MunroandBathelt2014:221).Inthiscontext,itisno
exaggerationtosuggestthatBlackBerryandNokiasinglehandedlypropelledtheirregions
intohigh-technologymarkets.Nokia’sroleasa“giant”intheFinnishinnovationecosystem
iswellestablished(Ali-YrkköandHermans2004).In2008,Nokia’s23,000domestic
employeesrepresentedroughly20%oftheFinnishICTsector(PajarinenandRouvinen
2015).Ajournalistsummarized,
TheroleofNokiaintheFinnishbusinesscommunitywasparamount.TheCEOsofNokiawereveryprominentfigures.Theywerethefirstamongequals,sothatNokiahadabigsayinthekindof,whatthebusinesscommunitywanted,Nokia’swordweighedmorethanothers.ThenwhenthecrashcameandFinlandwasonitskneesanditaquestionofwhetheritwouldbetakenoverbytheIMFandtherewasnolightinthetunnelandsuddenlyyouhadthisemergingkindofbusinessinNokia….TechnologyandinnovationthatwerepushedtohelpNokiaasmuchapossiblesoyoucouldsaycertainlyitbecameanationalproject(Interviewwithjournalist19June2012,Finland).
BlackBerry’sstaturewassimilar.Whileitemployedonly11,000atitspeakin2011
(Pender2015),thisrepresentedathird(Lu2013)toahalf(CBRE2016)ofICT
employmentinasignificantlysmallerregion.Evenbynationalstandards,itwasa
formidableforce.Inthewordsofoneformerhigh-technologyexecutive,“BlackBerrywas
absolutelythedominantfactornotonlyinthisecosystem,butalsothecountry.Atone
pointithadthelargestmarketcap,moresothananyoftheincumbents,includingthe
banks.OnecannotunderstatethetremendousimpactBlackBerryhad,”(Interviewwith
formerexecutive,technologyfirm,29November2017,Waterloo).Thestructural
compositionofemploymentatthetwoenterpriseswasalsosimilar,withprofessional
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servicessuchasresearchanddevelopmentsuperseding,butnotfullyreplacing,
manufacturingafterthedotcomcrash(Ali-Yrkkö2010:32;Yakabuski2009).
Bythesametoken,theirdeclinerepresentedanexistentialthreattoboth
communitiesafter2008.NokiareducedFinnishemploymentfrom23,000to6,000by
2016,whileBlackBerryshrankitsworkforcebyasimilarproportion,from11,000to2,700.
Here,however,thefatesofWaterlooandFinlanddiverge.WhileBlackBerry’sdeclinewas
perceivedasaclearcrisis(Interviewwithlocalpolitician,Waterlooregion,28November
2017),unemploymentfellandrealestatepricesincreasedafter2011(CBRE2014;Roose
2015).Inthewordsofalocalventurecapitalist,“InToronto,whenBlackBerrydeclined
everyoneassumedWaterloowasdead…ButBlackBerryfailedandwhathappened?House
pricesdeclinedformaybeadayandahalfandthenclimbedonward”(Interviewwith
venturecapitalist,22November2017,Waterloo,Canada).Today,industryrepresentatives
complainofalabormarketshortagewith2,500unfilledopenings(Interviewwith
representative,Communitech,1December2017,Waterloo).Resiliencewasbasedinpart
ontheestablishmentof1,845newtechnologyfirmsestablishedbetween2009and2014
(Dingman2015).Between2010and2015,Communitechwassupportinganaverageof400
startupsayear(Pender2017).4Estimatesvary,butby2016Waterloohostedthefastest-
growingtechnologyindustryinCanadaandICTemploymenthadsurpasseditspeakunder
BlackBerry(CBRE2016).Inthewordsofonejournalist,
Idon’tliketotalkinabsolutes,but[theimpactwas]closetozeroasyoucanwithoutbeingabsoluteaboutit.There’snoshortageofnewstartups…WhenBlackBerrysoldofftherealestate,therewas2.7millionsquarefeetofspace,thecommercialrealestatesectorwasapoplectic.Theythought
4 Toputthisfigureinperspective,Tekes,withalargerbudgetandbroadermandate,andservingaregionaleconomyoffivemillion,supportedonly600startupsin2015(Interviewwithdirector,Tekes,9June2016)
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we’dbeinasinkingmarketfortenyears.Insteadeveryonehasbeenpleasantlyshockedthatinalittleovertenmonthstheyleasedupmorethantwomillionsquarefeetofthat2.7million,largelybystartups(Interviewwithjournalist,15March2016,Waterloo,Canada).
InFinland,bycontrast,ICTemploymentfellbymorethan10%inthefouryears
followingNokia’sdecline(PajarinenandRouvinen2015:96).5R&Dexpenditure,ICTvalue-
added,andICTexportshaveallplummetedfollowingNokia’sdecline(Ali-Yrkköetal.
2015).IncontrasttoWaterloo,Nokia’sstrugglestransformedFinlandfromamodelpupil
intothe“sickman”ofEurope(Khan2015)andoneoftheworst-performingcountriesin
theEurozone(Eurostat2016).Nokia,whichhadcontributedheavilytoGDPgrowthduring
thelate1990sandearly2000s,wassinglehandedlyresponsibleforapproximatelyathird
ofthedeclineinnationaloutput(PajarinenandRouvinen2013:3).
Nokia’sdeclinewasnotanunmitigateddisaster.Thefirm’sstrugglesinspireda
waveofentrepreneurialactivity,aswellasamuch-neededreorientationofFinnish
innovationpolicy(Ornston2018).Inthissense,theFinnishICTindustryhasproven
resilienttothedeclineofitsflagshipfirm.ButtheFinnishstart-upscenecomeswith
caveats.Employmentgainsremainmodest.Gaming,whichbyallaccountshaspropelled
the“new”ICTindustry,employedonly2,750in2016.Thesefirmsareenterprises
productive,butother“technologystartups”disguiserelativelylow-productivity,part-time,
one-personconsultingoperations(Interviewwitheconomist,17June2016,Finland).Asa
result,whereasobserversinWaterloomarvelattheresilienceoftheirICTecosystem,their
Finnishcounterpartsoftendescribeaboomingstartupsceneinmorecautiousterms,
5 Thedeclinesoundsmodestbutisactuallyquitestrikingbecauseitoccurredagainstthebackdropofalong-term,secularincreaseinthedemandforICT-relatedgoodsandservices(Interviewwitheconomist,17June2016,Finland)
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expressingdoubtsaboutitsmaturityandsustainability.OneICTconsultantglumly
concluded,“Ofcourse,fromaventurecapitalistpointofview,therearemoreopportunities
toinvest.SoIabsolutelyagreethatsituationisbetternumber-wisethanitwastenyears
ago.Butthenumbersarestillverysmall.Ifyouthinkaboutthegamingindustrythereare
about150firms.”(Interviewwithconsultant,15June2016,Finland).Observerspraised
thequalityofFinland’shumancapital,butincontrasttoWaterloo,nooneidentifiedlabor
marketshortagesasabindingconstraint(Interviewwithformerpolicymaker,7June2016,
Tekesdirector9June2016andeconomist17June2016).TheFinnishICTindustrymay
emergefromthecrisisstrongerthanever,butthetransitionhasclearlybeenmuchrockier.
WhyWaterlooFlourishedWhileFinlandStruggled:ConventionalExplanations
ThereasonsforWaterloo’sresiliencearenotimmediatelyobvious.Theregion
shouldhavebeenmorevulnerabletoBlackBerry’stroublesastheenterpriserepresenteda
highershareofICTandaggregateemploymentthanNokiaeverdidinFinland.Norcan
thesedivergentoutcomesbeattributedtotheinternalcharacterofthetwofirms.Asnoted
above,bothofferedsimilarproductsinthesameindustryandbothweredisruptedbythe
sameinnovation,theInternet-enabledsmartphone.Whilesomeflagshipfirms,suchasIBM
orNovoNordisk,strengthenedregionaleconomiesbyencouragingentrepreneurship,both
BlackBerryandNokiaresembledclosedshops.Spinoffswererareandstrongly,if
unofficially,discouragedbybothenterprises.Nokiaexecutivesattributedthedearthof
spinoffstogenerousremuneration(Interviewwithexecutiveofficer,Nokia,24November
2006),butitalsoreflectedahighlycentralizedandsecretivecorporateculture(Interview
withprofessor,7June2012andventurecapitalist,8June2012,Finland).Onejournalist
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remarked,“Nokiaissuchaclosedcompanythatitisveryhardtogetanyinformation.They
haveverystrictinternalrulesabouthowtotalktooutsiders…Wedon’tknowenough,they
don’ttellus.Theyaresuchabigcompanyinasmallcountry,butnooneknowswhatis
goingon”(Interviewwithjournalist19June2012,Finland).BlackBerrywasnodifferent,
“Theapproachoftheleadership[was]thatyoushouldneverleave…Therearenumerous
storiesofblackballingandblockingpeopleiftheylefttostarttheirownthing”(Interview
withformerBlackBerryemployee,23November2017,Waterloo).
SinceBlackBerryandNokiaweresosimilar,wecouldinsteadturntoregional
differencestoexplainthesedifferentoutcomes.IntervieweesinWaterloowerequickto
pointtotheirdiversifiedeconomy,andtheinsuranceindustryinparticular,asasourceof
strength(Interviewwithlocalpolicymaker,29November2017,Waterloo,Canada).
Finland,bycontrast,historicallyreliedonnaturalresources,mostnotablyforestry.Both
regions,however,exhibitedstrengthinmetalprocessingandadvancedmanufacturing
(MunroandBathelt2014;PaijaandPalmberg2006).Moreimportantly,ifWaterloo’s
economicperformancewasdrivenbyinsurance,manufacturing,andotherindustries,we
wouldexpecthigh-technologyemploymenttoshrinkasemployeesfledtoothersectors.
ICTemployment,however,increased.Conversely,wewouldexpectmoreFinnstoturnto
entrepreneurshipiftraditionalindustrieswerefoundering.Instead,theoppositeoccurred.
ThedifferencesbetweenFinlandandWaterloocouldreflectthefactthattheformer
isanation-state,whereasthelatterisaregion.WhileregionaldevelopmentsinEspoo,
Oulu,andSaloparallelednationaltrends,perhapsWaterloobenefitedfromamoremobile
labormarketorcountercyclicalspendingbyprovincialandfederalauthorities.Thereisno
questionthatneighboringmunicipalitiessuchasTorontoabsorbedsomeformer
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BlackBerryworkers.ButthefactthatICTemploymenthasgrownsuggeststhatWaterloo
didnotadaptbysheddinghigh-skilllabor(CBRE2016).Moreover,withthishealthylabor
market,Waterloowashardlyatargetforcountercyclicalspending.Nordidthefederalor
provincialgovernmentorchestrateabailoutofBlackBerry,relyingonexistingretraining
andadvisoryschemestoreallocatelabor(Interviewswithregionalexecutiveandlocal
policymaker,29November2017,Waterloo,Canada).Ifanything,Finnishpolicymakers
weremoreactiveinthisspacefollowingthecollapseofNokia(Interviewwithformer
incubatordirector,23November2017,Waterloo).
Perhapsmicroeconomicdifferencesplayedacriticalrole,mostnotablythefactthat
Waterloowassituatedwithinaliberalmarketeconomy,whereasFinlandreliedon
strategiccoordination.Irevisitthispointintheconclusion,butafirstcutsuggeststhatthe
tworegionswerenotasdifferent.High-technologyenterprisesinFinlanddidnotview
labormarketregulationorotherformsofstrategiccoordinationasasignificant
impedimenttoentrepreneurship,partlybecauseFinlandsuccessfullyadaptedits
institutionstopromoteradicalproductinnovationinthe1990s(Ornston2012)andpartly
becauseentrepreneurscouldcircumventonerousrestrictionsinalightlyunionizedsector
bystrikingatypicalcontractswiththeiremployeesandindustrypartners(Herrmann2009;
Lange2009).BothFinlandandWaterloobenefitedfromlowinterestratesandabundant
venturecapitalafter2009,albeitatfarlowerlevelsthanUSregionssuchasSiliconValley
(FVCA2016;Pender2014).Instead,FinnishandCanadianentrepreneursalikeemphasized
strikinglysimilarchallenges,especiallytheirperipherallocationasitrelatestoaccessing
customersandsenior-levelmanagerialtalent(Interviewswithrepresentative,forest
association,11October2005,Finland,director,venturecapitalfund,22November2006,
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director,venturecapitalfund23November,2006,Finland,representative,Chamberof
Commerce,15March2016,Waterloo,executive,high-technologyfirm,23November2017,
Waterloo,andformerdirector,venturecapitalfund,23November,2017).Inshort,the
similaritiesbetweenthetworegionsaremorestrikingthanthedifferences.
Tothispoint,patternsofhigh-technologyentrepreneurshipwerestrikinglysimilar
before2008.DespiteWaterloo’spositionwithinaliberalmarketeconomyanditsrecent
statusasahigh-technologyhub,start-upactivitywasmodestbefore2008(Interviewswith
executive,high-technologyfirm,23November2017,formerpartner,venturecapitalfund,
23November,2017,andexecutive,high-technologyfirm,28November2017,andformer
CEO,29November2017,Waterloo).InthewordsofoneUniversityofWaterlooalumnus,“I
wenttoschoolhereintheearly1990sandentrepreneurshipwassomethingyoudidifyou
couldn’tfindajobwhenyougraduated.Itwasn’thighontheaspirationlist…Itwasn’t
talkedaboutorcelebratedthewaythatitistoday”(Interviewwithemployee,incubator,24
November2017).Theregionboastedseveraldozenmoderatelysuccessful,high-
technologystartupssuchasDescartes,Maple,OpenText,Desire2Learn,Pixstream,and
Sandvine.Duringthe1980sand1990sButthesamecouldbesaidofFinland,which
producedBenefon,Elekrobit,F-Secure,IOBox,Martis,SSHCommunications,NetHawk,and
Tecnomanatthesametime.Inlightoftheseinstitutionalandhistoricsimilarities,itis
difficulttoconcludethatWaterloowasfundamentallymorereceptivetohigh-technology
entrepreneurshipthanFinland.
Tounderstandwhythetworegionsdiverged,wemustinsteadlookbeyond
BlackBerry,Nokia,Waterloo,andFinlandtotherelationshipbetweenthem.Followingthe
theoreticalframeworkarticulatedabove,Iexaminethedegreetowhichthesetwoflagships
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wereincorporatedintothepolicymakingprocess,integratedwithinindustrialnetworks
andculturallyembeddedwithintheirlocalsocieties.Whilebothenterprisesdominated
theirrespectivecommunities,IdemonstratethatNokiawasmoreembeddedthan
BlackBerry.ItcontributedsignificantlymoretotheICTinnovationecosystem,but
simultaneouslyincreasedFinland’svulnerabilitytodisruptiveeconomicshocks.
EmbeddingFlagshipFirms:BlackBerryandNokia
Nokiarepresentsthearchetypicalexampleofanembeddedenterprise.Nokiawas
politicallycentralsinceCEOKariKairamousedhispositionaschairmanofthe
ConfederationofFinnishEmployerstolobbyfornewinnovationpoliciesinthe1980s
(MoenandLilja2005:372).Bythe1990s,thefirmenjoyeddirectrepresentationwithinthe
influentialScienceandPolicyTechnologyCouncilandonotherbodies,suchastheboardof
theFinnishFundingAgencyforTechnologyandInnovation(Tekes).Inthewordsofone
formeremployee,
WhenIwasworkingatNokiatheindustryassociations,theFederationofTechnologyIndustriesandeventheFinnishgovernmentwouldapproachusandask“Whatisthenextthingthatweneedtodo?”AndIthought,“Whyareyouaskingme?Shouldn’tyouhaveaplanofyourown?”(Interviewwithformeremployee,Nokia,14June2016,Finland)
Nokia’sinfluencewasmostconspicuousineducation,wherethefirmnotonlyvacuumed
uphumancapital(Interviewswithventurecapitalist8June2016andsoftwareindustry
representative10June2016,Finland),butalsodirectlyinfluenceduniversityand
polytechnicoutput.Nokia’sdemandsdrovethedecisiontodoubleuniversityintakeand
triplepolytechnicintakeduringthe1990s(Dahlman2006:102).Notcoincidentally,
educationalexpansionfocusedonengineering,andICTinparticular.Bytheturnofthe
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millennium,FinlandrankedsecondonlytoSouthKoreaintheshareofengineers(OECD
2003).
Nokia’sinfluenceextendedtomyriadotherpolicydomains,fromcapitaltaxation
(Pelkonen2008:407)toimmigration(BärlundandBrewis2013:21),dataprivacy(Lee
2009)andinnovationpolicy(Ornston2018).Focusingonthelatter,thefirmreceived175
millionEuroinR&DfundingfromTekesalonebetween1995and2008.Inadditionto
dwarfingCanadiansupportforBlackBerry,thisfundingwasusedtosupportprivate-public
andinter-firmcollaboration.Between1995and2008,Nokiaparticipatedinnofewerthan
375separateTekesprojects(Ali-Yrkkö2010:26-27),oftensituatingitselfatthecenterof
theseconsortia(PaijaandPalmberg2006:78).Formeremployeesmakeitclearthatbythe
mid-1990sthegoalwasnotpublicfunding,whichwasheavilyregulatedbytheEUand
paledincomparisontoNokia’scorporateR&Dbudget.Rather,NokiausedFinnish
innovationpoliciestomonitortechnologicaldevelopmentsandmobilizeactorsaroundits
strategicvision(Ornston2012:83).
Forexample,FinlandrankedhighestintheOECDinmeasuresofindustry-university
cooperationbytheturnofthemillennium(Koskietal.2006:50).Nokia,notsurprisingly,
dominatedthesetight-knitrelationships.Nokiaemployeesandacademicsalikewerequick
todescribecooperationinvariousprojects,fromengineeringasoftwareprotocolforthe
GSMmobilestandardtothepsychologyofuser-friendlydesign(Interviewswithprofessor,
27September2005,formerprofessorandNokiaemployee,17October2005,and
professor,8November2005,Finland).Myownearlyresearchonpoliticalsciencewas
supportedbyNokia,amongothersources.
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Nokiausedthesepublicpoliciestoembeditselfeconomically.Tekes-funded
researchconsortia,aswellasNokia’sowndeeppockets,enabledittoconstructasprawling
networkofthreehundredfirst-tier,Finnishsuppliers(Ali-YrkköandHermans2004:113).
Bythelate1990s,thisclusteremployedalmostasmanyFinns(14,000)asNokiaitself
(21,000)(Paija2000:4).Whilemostmanufacturingsub-contractorsmovedabroadafter
thedotcomcrash,NokiacontinuedtorelyheavilyonFinnishenterprisesinsoftware
developmentuntilthefirm’scollapse(Interviewwithformerexecutive,24November
2006,Finland).Bothmanufacturingandsoftwaresub-contractingincludedresearch,as
Nokiaaimedtoexternalizeone-thirdofitsR&D(Interviewwithexecutive,non-
telecommunicationsfirm,24October2005,Finland).Theconnectionsbetweenthese
companiesweresostrongthatforeignenterprisesaspiringtopenetrateNokia’ssupplier
networkacquiredFinnishsub-contractors.Thekeyattractionwasnottheirtechnologyor
skills,butrathertheirclosepersonalrelationshipswithNokiaemployees(Interviewwith
policymaker,11November2005,Finland).
Asaresultofitsdominantpositioninpoliticsandeconomics,Nokiawasalso
culturallyembedded.Asnotedabove,KariKairamousedtheConfederationofFinnish
Employersandinformalroundtablestotransformemployerattitudestowardtechnological
innovationduringthe1980s(MoenandLilja2005:372).Inthe1990s,Nokiawasarole
modelforaspiringentrepreneurs,eventhoseunconnectedtotheenterprise.Itiseasyto
understandwhyastheFinnishpressconsistentlylionizedthefirm.Journalistslikened
NokiatoclassiciconsofFinnishnesssuchasthehoe,themarsh,andaspiritofsisuor
determination(Linden2012:243).Meanwhile,thecountry’smostprestigiousnewspaper,
theHelsinginSanomat,amendeditseditorialpolicy,reviewingallrelevantcontentwith
18
Nokiabeforepublication(Linden2012:271).Alternativeperspectives,totheextentthat
theyexisted,wereburiedbythecoverageofNokia’saccomplishments(Ornston2018).
BlackBerry’srelationshipwiththeWaterlooregionwasverydifferent.Tobeclear,
thecompanywasnotanarchetypical“enclave”enterprise.Asonepoliticiannoted,
“[BlackBerry]hadthisincredibleloyaltytothecommunity.Idon’tthinktherewouldbe
anothercompanythatwassoloyaltothecommunity,whoseownersinvestedsomuch”
(Interviewwithformerpolitician,28November2017,Waterloo).Othersidentifiedthe
enterpriseasanimportantpartnerinregionalbrandingefforts(Interviewwithjournalist,
15March2016).Butthefirm’spoliticalinfluencewasmoremodestthanNokia’s.Thiswas
partlyduetothedearthofrelevantpolicyinstrumentsatthemunicipalandregionallevel.
ButthefirmwasalsomorealoofthanNokia.Thepoliticianabovecontinuedbylikening
BlackBerryto“theVaticaninRome,”noting“Theylivedtheirownlife….Theonlytime
we’dbeinvolvedwaswhentheywantedtobuildabuilding.Theyneverhadanimpacton
ourpolicydecisions”(Interviewwithformerpolitician,28November2017,Waterloo).This
cordial,butarms-lengthrelationshipalsoextendedtothelocalindustryassociation,
Communitech(incontrasttoNokia’sdominancewithinTechnologyIndustriesofFinland).
Considereducation,whereBlackBerry’sinfluencewasthemostconspicuous.The
firmenjoyedacloserelationshipwiththeUniversityofWaterloo.Co-founderMike
Lazaridisdescribeduniversitygraduatestoavaluablenaturalresource,(Sweeny2009:35)
andmanagementdeliberatelydesignedtheirofficestofacecampus(McQueen2010:197-
98).BlackBerryclearlyinfluencedthecurriculumattheUniversityofWaterloo,notleast
throughanapprentice-stylesystemofco-opeducation,whichdiffusednewideasfromthe
19
BlackBerryworkplaceintotheclassroom(MunroandBathelt2014).BlackBerry,however,
couldnotdirectlyinfluenceuniversityoutputthewayNokiadid.
Inotherareas,thefirm’sinfluencewasevenmoremodest.Executivesdonated
generouslytotheuniversity,giving$70milliontoestablishthePerimeterInstitutefor
TheoreticalPhysicsand$50milliontofoundtheBalsillieSchoolofInternationalAffairsat
theUniversityofWaterloo(Gillmor2012).Indoingso,however,MikeLazaridisandJim
Balsillieactedasindividualsratherthanacompany.UnlikeNokia’sinvolvementinFinland,
theseinvestmentswerenotconnectedtoBlackBerry’sstrategicvision(Interviewwith
professor24November2017,Waterloo).Researchcollaborationwasalsolesssystematic
(Sweeny2009:35).Whilesomedepartmentssuchaselectricalengineeringworkedclosely
withBlackBerry,otherdepartments,eventechnicalones,didnot(Interviewwith
professors22and24November2017,Waterloo).ContrastingBlackBerrytoNokiaand
Nortel,theformerCanadiantechtitan,afacultymemberremarked,
EveryonehadpartnershipswithNortelanddidthingswithNortel.ItwashardtohaveapolicyreviewwhereaNortelrepresentativewasnotpresent.Notonlyhere,butinOttawa,governmentthings,youwouldn’tassemblesomethingonuniversity-governmentrelationsandnothaveNortelonit.ButIdon’trememberpeoplefromBlackBerry.BlackBerryneverhadthatstatus.Itseemedthatyoudidn’tneedaBlackBerryperson.Nortel,andIBMmaybe(Interviewwithprofessor,22November2017,Waterloo).
ThisquotereflectsBlackBerry’slimitedcloutattheprovincialandfederallevel,partlyasa
reactiontoNortel’scollapseduringthedotcomcrash.Whileprovincialandfederal
policymakersmobilizedresourcesaroundtheenterprise,supportwasinconsistent.
BlackBerryreceived$4.7millionfromtheOntarioTechnologyFundinthe1990sand$39.7
millionfromTechnologyPartnershipsCanadaattheturnofthemillennium,aswellastax
creditsforresearchanddevelopment,butsomeofthissupportwasdirectedatother
20
regionsandBlackBerrydidnotreceiveanypublicfundingafter2004(McQueen2010:198;
Sweeny2009:77).Moreimportantly,fundingwasdirectedBlackBerryitselfinsteadof
beingusedtoconstructFinnish-styleacademicandindustrialnetworks.
Partlyasaresultofthis,BlackBerry’sVatican-likeisolationextendedtotheprivate
sector.Sub-contractors,suchasCerticom,weretheexceptionratherthantherule.When
askedtoidentifyfirmsthatworkedwithBlackBerry,interviewees(Interviewswith
journalistandindustryrepresentative,15March2016)andsecondarysources(Gillmor
2012)alikeidentifiedcaterersorrestaurantsratherthancomponentsuppliersorsoftware
providers.Thefirm’smostimportantpartnerswerelocatedelsewhereinCanada(e.g.
Celestica)oroutsideofthecountry(e.g.Elcoteq,aFinnishfirm)(Yakabuski2009).Thisis
typicaloftheWaterlooregion,whereinter-firmlinkagesarerelativelyweak(Munroand
Bathelt2014).Nor,asnotedabove,wasBlackBerryparticularlyconducivetospinoffs
(Interviewswithjournalist15March2016andformerBlackBerryemployee,23November
2017,Waterloo,Canada).Itspatentdisputewiththelocal,technologystartup,Kik,
representsasharpcounterpointtothelong-termpartnershipsthatcharacterizedthe
FinnishICTecosystem(Hardy2013).6
Partlyasaresultofitslimitedengagementinthelocaleconomyandpolitics,
BlackBerryneverexercisedthehegemonicinfluencethatNokiaexertedinFinland.Tobe
clear,BlackBerrydominatedlocalheadlines(Interviewwithjournalist,15March2016)
andpoliticianswerepressuredtosupportthefirmbyusingBlackBerrydevicesand
highlightingthefirm’saccomplishments(Interviewwithformerexecutive,Universityof
6 Ofcourse,theseconnectionsdidnotnecessarilybenefitNokia’ssuppliersandrelationsdeterioratedquicklywhenNokiaranintotrouble(Ornston2018).
21
Waterloo,23November2017).ButBlackBerry’sinfluencedidnotextendtothenational
media,whichwasdividedbetweencompetingdevelopmentalmodels.Here,enthusiasmfor
rapid,innovation-basedcompetitionwastemperedbythecollapseofNortelandthe
growthofnaturalresourceexports,mostnotablyoil.
Byallmeasures,BlackBerrydeservesitsclassificationasaflagshipfirm.Controlling
forpopulation,thefirmemployedanevenlargershareofthelocallaborforceandtheICT
industrythanNokiainFinland.Byredefiningtheregionasahigh-technologyhub,
BlackBerryalsoallowedWaterlootoattracthumancapital,publicfunding,andprivate
sectorinvestment(Gillmor2012;Nellesetal.2005).ButBlackBerry’sinfluencedidnot
extendfarbeyondthis.IncontrasttoNokia,BlackBerry’sswayoverlocal,provincial,and
federalpolicyremainedmodest,whilethefirmdidnotmaintainaparticularlylarge
networkofprivatesub-contractorsoracademicpartners.Thisisolationcouldhavebeen
viewedasaweaknesswhenthecompanywasgrowing,butitwasaclearassetafter2009.
WhenFlagshipsFalter:Post-CrisisEconomicAdjustmentinWaterlooandFinland
BecausebothFinlandandWaterloohostedflagshipfirms,thetworegionsfaced
somecommonchallenges.BlackBerryandNokiaalikevacuumeduphumancapitalduring
the2000s.InWaterloo,“BlackBerrywassuckingupeveryemployeeanddrivingwages
higher.Therewashugewageinflation,itwasnotacheapplacetofindlabor.Sothestartup
culturewassufferingbecauseeveryonewasgoingtoBlackBerry”(Interviewwithventure
capitalist,22,November2017,Waterloo).InFinland,“Nokiahasbeenallthistimeabig
treeintheelectronicindustrythathasbeenshadowingandkillingalmosteverything.Ithas
beenaveryhighrisk,especiallyinthe1990s.Itwasahugeriskforstartupsandthemain
22
reasonwasthatNokiawashiringsomanyengineers”(Interviewwithdirector,venture
capitalfirm,20November,2006,Finland).By2012,thechallengewasverydifferentasthe
twoenterprisesdumpedskilledlaborevenmorerapidlythantheyhadhiredit.Whileboth
firmshadaskilledlaborforce,neitheronewasparticularlywell-adaptedto
entrepreneurship.Inbothregions,flagshipemployeeswereresponsibleforarelatively
smallnumberofnewstartups(Interviewwitheconomist,7June2012,Finland,executive,
technologyfirm23November2017andexecutive,Communitech,1December2017,
Waterloo).
InFinland,however,Nokia’scentralpositionwithintheICTecosystemcompounded
thesechallengesinthreeways.First,Nokia’seffortstoconstructanentirenetworkaround
itsstrategicvisioninspiredmanystart-upstopartnerwiththeenterpriseassub-
contractors.ManyofthestartupsinOulu,forexample,cuttheirteethsupplyingNokia
(Interviewwithventurecapitalist8June2012,Finland).Thiswasparticularlytrueof
manufacturing,wheremanyofFinland’smostprominentICTenterprises,including
Elcoteq,Eimo,andPerlos,deliveredcomponentstoNokia.Thesefirmsdeclinedafterthe
dotcomcrashasNokiareduceditsmanufacturingprofileandrelentlessloweredcosts
(Seppälä2010).
Softwaredevelopmentcontinuedafterthedotcomcrash,however,andNokia
partneredwithFinnishenterprisesinitseffortstoredefineitselfasasoftwarefirm
(Interviewwithexecutiveofficer,Nokia,24November2006,Finland).Unlikethe
manufacturingfirmsabove,thesecompaniesbenefitedfromlowerfixedcostsandrapidly
increasingdemandforsoftwarebyotherFinnishenterprises.Nonetheless,theywerehard
hitbyNokia’sdecisiontoabandonworkonitsSymbianandMeeGoplatforms.Finland’s
23
largestsoftwarefirm,Tieto,wasperhapsbestpositionedtowithstandthisshockbyvirtue
ofitsmultinational,diversifiedconsultancyoperations,butevenitwasforcedtolayoff
workers.Other,morespecializedoperationswerelessfortunate(Interviewwith
economist,17June2016,Finland).
Second,evenhigh-technologyenterprisesoutsideofNokia’ssphereofinfluence
wereaffectedbythefirm’ssuccess.Asanarchetypicalexampleof“Finnishness”andapoint
ofnationalpride,itwashardnottofollowNokia’sleadintotelecommunications.Ofthesix
prominentstartupslistedabovethatwerenotpartofNokia’ssub-contractingnetwork,
four(Benefon,IOBox,SSHCommunications,andTecnoman)operatedinthe
communicationsspace.ThiswasnotananomalyasanalystsremarkedonFinland’sdeepby
narrowspecializationintelecommunications(Hyytinenetal.2006).Thisnarrowfocus
createdopportunities,mostnotablyformobilegamingenterprisessuchasRovioand
SupercellwhichcapitalizedonthegrowthofApple’snewiOSplatform(Cutler2013).But
bycedingleadershipinthedevelopmentof4Gtechnologiesandapplications,Nokia’s
strugglesdisruptedawidearrayofFinnishenterprises,includingthoseoutsideofits
subcontractingnetwork.
Finally,Nokiainfluencedpublicpolicyinwaysthatsystematicallydisadvantaged
Finnishentrepreneurs.Notsurprisingly,Nokia’sinfluenceoverFinnishinnovationpolicy
encouragedthenarrowpatternofspecializationdescribedabove.Asonefrustratedtech
executivesummarized,
There’ssomuchsupportforR&D,forinternationalizationandforotheractivities,butitisalwaysabouttelecoms.Imean,whatthehell?Whyisthat?It’sasiftelecomscompaniesaretheonlygrowth-oriented,hi-techfirmsinFinland.IwasatameetinginIndiaandabout60%ofthemeetingwasonlyabouttelecoms.Butthereareothercompaniesthatcouldprobablybenefit
24
evenmorefromconnectionsinIndia(Interviewwithexecutive,non-telecommunicationsfirm,24October2005,Finland).
Thisbiastowardmobilecommunicationsmayexplainwhysomanyentrepreneursoutside
ofthetelecommunicationsindustrycriticizedtheFinnishFundingAgencyforTechnology
andInnovationasirrelevantorincompetent(Ornston2014).Fromtheperspectiveofan
aspiringentrepreneur,however,publicsupportclearlyincentivizedspecializationin
mobilecommunications.
Secondandmoreimportantly,Finnishinnovationpoliciesfocusedheavilyon
technologicaldevelopment(Leiponen2004:102).Newfirms,forexample,wereevaluated
onthetechnicalqualityoftheirproducersratherthantheircommercialviability(Interview
withdirector,Tekes,16June2016,Finland).Acolleagueconfirmed,“Tekeswasestablished
in1983andwasveryfocusedontechnology,technologywasinthename….Today,ahuge
amountoftroublecomesfrom1983wherewejustlookedatnewtechnology”(Interview
withdirector,Tekes,9June2016,Finland).ThismayhaveworkedforNokia,acentury-old
conglomeratewithsophisticatedlogisticalcapabilitiesandestablishedmarketingchannels
(Häikiö2002),butitdidnothelpinexperiencedstartups.Firstandsecondgeneration
entrepreneurshippoliciesinthe1980sand1990smobilizeventurefunding,butfocusedon
alleviatingcapitalshortagesratherthandeliveringadviceorsupportservices(Luukkonen
2006).Thisrelativeinattentiontocommercializationandmentoringwasexacerbatedby
thefactthatmanyofFinland’smostsuccessfulstartupswereoperatingwithinNokia’s
orbitratherthaninteractingdirectlywithconsumers.
Theseone-sidedinnovationpolicieschangedandchangedrapidlyfollowingNokia’s
collapse.Tekes’Vigoacceleratorprogram,launchedin2009,explicitlyfocusedon
25
commercializationandmentorshipratherthantechnicaldevelopment,inspiring
policymakersinWaterloo(Interviewwithformerpolicymaker,23November2017,
Waterloo).Between2005and2012,Tekesfundingforstart-upstripledfrom40millionto
130millionEuro(Interviewwithdirector,Tekes,9June2016).Commentingonthechange,
adirectorremarked,
Ihavebeenhere[forroughlyadecade]andtheapplicationprocessatTekeshaschangedalot.Before,wewereprimarilyinterestedinthetechnology,hownewandpromisingthetechnologywas.Today,wehardlyfocusonthetechnologyatall.Thereneedstobeasolidbusinessmodelandmarketpotential.Thereisalotmoreattentiontocommercialization(interviewwithdirector,Tekes,16June2016)
Increasingsupportwasdriveninpartbyincreasingstudentinterestinentrepreneurship.
TheAaltoEntrepreneurshipSociety,establishedin2009,hostsitsownbusiness
acceleratorandhasorganizedSlush,Europe’slargeststart-upconference(Best2014;
Toivonen2014).Collectively,thesedevelopmentshavetransformedtheFinnishICT
ecosystem.Inthewordsofaveteranventurecapitalist,“[Adecadeago,]Isaweverysingle
startupinFinland,eithermeormyteam.NowI’mhappyifweseeoneinfiveoroneinten.
[Perhaps]we’vebecomealittlelazy,butsomuchishappening.Thestartupsceneis
sizzling”(interviewwithventurecapitalist,8June2016).Gaming,responsiblefor20%of
turnoverintheICTindustry(Neogames2014),hasgarneredthemostinternational
attention,butitispossibletoidentifypromisingenterprisesinamuchwiderrangeof
industriesthanthemorespecialized1990sor2000s(Interviewswithventurecapitalist,8
June2016,anddirector,Tekes,16June2016,Finland).
Whilethepost-NokiareinventionoftheFinnishICTindustryisimpressive,the
sectorfacesheadwinds.ICTemploymenthasnotregainedtheheightsitachievedunder
26
Nokia.TheFinnishgamingindustry,forexample,employedonly2,750in2016.These
modestemploymentfiguresobscureamuchsteeperdeclineinoutput.Effortstoboost
employmentandproductivityarehamperedbytherelativeimmaturityofthesector.
Finlandhasrelativelyfewexperienced,serialentrepreneursandmanyofitsmost
successfulstartupsdevelopedunderNokia’swingratherthanindependentlydefining
markets,internationalizingandmanagingcustomers.WhileFinlandhasmadeprogresson
thisfront,thesedeficitsareparticularlystrikingwhenjuxtaposedwithWaterloo.
IncontrasttoNokia,BlackBerrydidnotconstructasuppliernetworkinWaterloo.
Asonetechnologyexecutivebluntlyobserved,“RIMwasverymuchorganizedandledasa
single,homogeneousentity.Itdidnothaveanecosystem,notinhardwareandnotin
software”(Interviewwithformerexecutive,technologyfirm,29November2017,
Waterloo).Asaresult,RIM’scollapsemayhaveimpactedcaterers,hoteliers,intellectual
propertylawyersandothergeneralserviceproviders,butitdidnotaffecttechnologyfirms
(Dingman2015).NorwerelocalfirmsparticularlyaffectedbytheriseoftheiOSandthe
Internet-enabledsmartphone.BecauseBlackBerrywaslessdominantwithinpolicymaking
circlesandlesshegemonicwithintheCanadianmedia,high-technologyentrepreneurship,
asmodestasitmayhavebeenduringthe1980sand1990s,waslesstightlycoupledto
telecommunicationsthaninFinland(Interviewwithprofessor,UniversityofWaterloo,24
November2017andformerexecutive,technologyfirm,29November2017,Waterloo).
ThismorediversifiedICTindustrybenefitedWaterloointwoways.First,theregion
couldrelyonasmallbutstableclusterofenterprisesexploitthetalentexitingBlackBerry.
Forexample,medium-sizedenterprisessuchasOpenText(4,000employees)inInternet
searchorDesire2Learn(1,000employees)ineducationwerenotadverselyaffectedby
27
BlackBerry’scollapseorthedevelopmentoftheiPhone.Politiciansandtechnology
executivesdescribeacollectiveefforttoplaceBlackBerrytalentwithintheseenterprisesin
thewakeofthecrisis(Interviewwithformerpolitician,28November2017andformer
technologyexecutive29November2017,Waterloo).Theformerpolitician,above,claimed
thatCommunitechalonehad2,000openjobsattheheightofthecrisis.Thiswasonly
possiblewithinalesstightlyintegratedICTecosystem.
EstablishedenterprisescouldnothireallofthetalentthatleftWaterloo,butthey
deliveredasecondbenefit.BecausetheseenterpriseswerenotsupplyingBlackBerry,they
hadtosecuretheirownriskcapital,customersandmarketingchannels.Whereasthe
historicinattentiontomentoringanddearthofexperiencedmanagersisaliabilityinthe
Finnishinnovationsystem(Ornston2018),aspiringentrepreneursinWaterloocanturnto
awidevarietyofengagedentrepreneurswhoeffectivelybootstrappedtheirorganizations
withoutBlackBerry’ssupport.Indeed,newentrepreneursandindustryveteransdescribe
thesementoringnetworksasoneofthemostvaluableassetsintheregion(Interviewwith
partner,venturecapitalfund,22November2017,executive,high-technologyfirm,23
November2017,executive,technologyfirm,28November2017,andexecutive30
November2017).Toprovidejustoneillustrativeexample,
WhenIcametojointhefolksat[astartup],oneofthefirstthingsIdidwasasktojoinapeertopeergroupatCommunitechforchieffinancialofficers…Thethingthatstruckmewasthewaythecommunitywasopenandwillingtosharewitheachother.IcameinasanoutsiderandIhadpeopletoreachoutwithquestions.WhatdoIneedtodotogetSREDcredits?Whoisthebestpersontogoto?Whatshouldmyoptionplanlooklike?….Thatmentorshiphascarriedontothisday.Tenyearsago,[Iknew]thatifIhadastart-upIcouldsendthemsomewhereformentorship(Interviewwithformertechandventurecapitalemployee,23November2017,Waterloo).7
7 TheFinnishgamingindustrymayrepresenttheexceptionwhichprovestherule.WhileseveralgamingfirmsdeliveredproductstoNokia,thetight-knitcommunityformeditsownnetworkwithintheFinnish
28
Publicpolicyreinforcedthesestrengths.WhereasNokiareorientedFinnishinnovation
policiestowardtechnicaldevelopment,thecreativetensionbetweenBlackBerryand
Communitechenabledthelatterorganizationtoprioritizetheneedsofsmallandmedium-
sizedenterprisesasearlyasthe1990s(Interviewswithpartner,venturecapitalfirm,22
November2017andexecutive,technologyfirm,30November2017,Waterloo).While
Finlandsuccessfullyorienteditsinnovationpoliciesin2009,thisinfrastructurewasmore
fullydevelopedinWaterloo.Manyremainconcernedaboutthescarcityofsenior
managerialtalent,especiallyinmarketing(Interviewwithformerventurecapitalist,23
November2017)buttherearealsodissentingvoices(Interviewswithprofessor,
UniversityofWaterloo23November2017andformeremployee,technologyfirm,24
November2017)andthesedeficitswereneveraspronouncedinFinland.Asaresult,
Waterloo-basedentrepreneurscouldhitthegroundrunning,whereastheirFinnish
counterpartsfacedthemoredauntingtaskofconstructinganentrepreneurialecosystem
fromscratch.Thiswaslessafunctionoflong-standinginstitutionaldifferencesbetween
thetwocommunitiesthanNokia’soutsizedrolewithintheFinnishinnovationsystemand
BlackBerry’smorealoofposture.
Conclusions
WhilethiscomparativestudyofFinlandandWaterloosuggeststhattheintegration
offlagshipfirmsisfraughtwithperil,skepticsmayquestionthedecisiontocomparea
region(Waterloo)withanation-state(Finland).Thereareseveralwaystoaddressthis innovationsystemandconstructedstrikinglysimilarpeer-to-peermentoringnetworksamongotherwiseindependententerprises(Ornston2018).
29
concern.WecouldpointtoparalleldevelopmentswithinspecificFinnishcommunities,
mostnotablyOulu,whichcloselyresemblesWaterlooinsize(200,000),itsyouthful
demographics,thepresenceofanentrepreneurialengineeringuniversity,anditsrecent
butstrikingspecializationinICT.LikeFinlandasawhole,regionalstartupsgravitated
towardtelecommunicationsandNokiainparticular(Interviewwithventurecapitalist8
June2012,Finland).Whilestartupactivityhassurgedsince2010,theregionwashard-hit
byNokia’sdecline.
BecauseOuluwasinfluencedbythesame,national-levelinfluencesthat
characterizeFinlandasawhole,however,itwouldbemoreinsightfultocompare
BlackBerrytoadeeplyintegratedflagshipfirmwithinCanada.Nortel,whichdominatedthe
localICTecosysteminOttawa,providesausefulcounterpoint,althoughthereare
opportunitycostsincomparingthetwofirms.UnlikeNokia,Nortelwasheavilyfocusedon
networkequipmentanddeclinedafulldecadeearlierthanBlackBerry.Theenterprise,
however,moreembeddedwithinitslocalcommunitythanNokiaeverwas.Incontrastto
BlackBerry,theflagshipemergedasadefactomemberongovernmentcommitteesduring
the1990s(Interviewwithprofessor,22November2017,Waterloo).Theenterprisewas
alsomoretightlyconnectedtolocalICTenterprises.ContrastingCommunitech,whichwas
inspiredbytheOttawa-CarletonResearchInstitute,aveterannoted,
Ifyoulookaround[Communitech],wehadadjacencies,butnotdirectinvolvement.Itmighthavebeenpennies,buttherestoftheecosystemwasnottightlycoupled…TheOttawaecosystemwasavibrantecosystemthathadasitsconsistentcomponentsNortel,Mytel,NewbridgeNetworksandwhatwasinterestingisthatyoufindthehallmarkofaNokiaecosysteminthattheywerealltelecommunications.TheywerealltightlycoupledtoeachotherandwhenNortelwentdown,theyallwentdown(InterviewwithformerCommunitechboardmember,29November,2017,Waterloo).
30
LikeFinland,Nortel’sdominancedisadvantagedtheregionintwoways.Inadditionto
Nortel’ssubcontractingnetwork,Nortel’ssuccessandpolicyinitiativesguidedindependent
enterprisesintotelecommunications.Asaresult,thesameforcesthataffectedNortel,
overinvestmentintelecommunicationsnetworks,affectedtheentireindustry(Interview
withformerCommunitechboardmember,29November,2017,Waterloo).
LikeFinland,Nortel’sdeclinewasnotadeathsentence.TheICTecosystem
recoveredandonecouldarguethatOttawahostsahealthierandmoresustainable
technologyclustertoday(Creutzbergetal.2017).Noneofthecasestudiesinthispaper
supportabroad-basedcritiqueofflagshipfirms.Inadditiontodrivingeconomicgrowth
anddeliveringawidevarietyofcollectivegoodswhentheyprosper,flagshipfirmscanseed
adiverseandvibrantecosystemwhentheycollapse.Thenatureofthistransition,however,
variesgreatly.InFinlandandOttawa,theshort-termeffectsofflagshipcollapsewere
catastrophic,triggeringdeepandprotracteddownturnsinbothICTindustries.Bycontrast,
theconsequencesofBlackBerry’sdecline,whilepainfulformanyindividuals,were
surprisinglyshallowandshort-lived.
Comparativeanalysissuggeststhatthisdivergencehaslesstodowiththeflagship
firmsthemselvesthanthewaytheyareembeddedwithinthelocalcommunity.Deeper
integrationmayfacilitateinvestmentinmoresophisticatedcollectivegoodsanddrive
knowledgespillovers,butitgreatlyincreasesvulnerabilitytodisruptiveshocks.Thepolicy
implicationsareclear.Whileembeddingcandeliverformidablebenefits,networking
initiatives,likeCommunitechinWaterloo,shouldfocusondevelopingcollaborationamong
smallerandmedium-sizedenterprisesratherthanconnectingthemtoaflagshipsuchas
NokiaorNortel.Thismayseemobvious,butitisanimportantandoft-overlooked
31
counterpointtotheemphasisonachievinggreaterscaleandcoordinationwithinnational
innovationsystems,includingCanada’s(Nicholson2016).
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