09/29/2014 05:19 EDT | Updated 11/29/2014 05:59 EST

Tech, Talent and Trains Are Key to Toronto-Waterloo Supercluster

Ali Asaria, CEO of Tulip Retail, is an entrepreneur with a foot in two cities. In the past seven years, the Research In Motion (now BlackBerry) alumnus has launched two tech startups, both based in Waterloo Region with substantial operations in Toronto.

Given that Waterloo and Toronto are separated by a 90-minute drive, it may seem strange for a fledgling firm to take on the cost and complexity of twin offices. But Asaria's decision is grounded in a pragmatic assessment of what both places have to offer a growth-oriented firm.

Tulip has taken root in an increasingly integrated innovation corridor bracketed by burgeoning tech hubs in both Waterloo Region and Toronto. But as companies look to this area for new opportunities, policy makers and business leaders are debating what's needed to transform the region into a supercluster, a question that will be the subject of a CityAge conference in Waterloo on Oct. 9 and 10.

In a nod to the issue's strategic importance to Ontario's economy, Premier Kathleen Wynne will speak at the event.

When Asaria started his first firm, he realized he needed executives with retail, sales and marketing skills. After scouting around, he realized the people with those resumes tended to be in Toronto. What's more, they didn't want to move.

"Talent in southern Ontario is distributed among several cities," he says. "The best of the best aren't always in the same place."

His solution: Open an office in Toronto. Tulip's structure gives the company access to the talent pools in both cities, but the logistics pose a challenge. Asaria likes to get his staff together once a week, but traffic can throw a spammer into those plans. "There's no reliable way to get between the two cities."

Asaria's story offers a glimpse into the future of an extended metropolitan region with an innovation supercluster.

"When I drive from Toronto to Waterloo, there are no more boundaries," says David Wolfe, the Royal Bank chair in Public and Economic Policy at the University of Toronto's Munk School of Global Affairs. "Waterloo is heading east and Mississauga is heading west."

That convergence may not seem like an obvious coupling. Toronto is home to financial services, food processing and aerospace while Waterloo Region is dominated by manufacturing, insurance and the tech industry.

Wolfe points to major changes in the region's tech sector. IT firms have flocked to Toronto as the city's banking centre has become an "enormous magnet" for them, says Wolfe.

"There's a lot of potential for Waterloo firms to tap into what's going on down there." The networks and economic linkages between the two cities "need to be intensified."

Iain Klugman, CEO of Communitech, the innovation hub in Waterloo Region, says he's seeing a growing number of personal connections between the two cities' tech industries. And entrepreneurs like Asaria don't want to be forced to choose.

But the reality for many Waterloo IT firms is that younger recruits want to live in Toronto's lively downtown. Says Klugman, "We need to up our game to make it attractive to 20- to 30-year-olds."

That dynamic has emerged in Silicon Valley as hot tech firms set up in San Francisco or run buses south to the office parks near San Jose.

"Where people want to live is a challenge for the Waterloo model," says Wolfe. "They're in danger of losing part of the talent pool to the downtown core."

Local tech leaders like Klugman have been pushing Queen's Park to boost commuter rail service between Waterloo and Toronto to allow people to work in one place and live in the other. Ontario took a step towards this last week and bought a key stretch of track along the route. Such infrastructure "is one of the best investments for government," says Asaria. "The payoff is such an opportunity in the long run."

Wolfe, however, warns that "the rail link is the easy part" of building a supercluster. "Everything else is going to get harder." The province, he adds, has to encourage corridor growth not via "blunt instruments" like tax breaks but with strategic investments in industry groups meant to reinforce regional networks.

There are numerous examples, among them Silicon Valley and the bio-medical corridor along Boston's Route 128. In an increasingly global, innovation-oriented economy where talent is key, many city-regions have sought to build clusters, such as Albany's nanotechnology hub.

Others are looking for ways to strengthen existing clusters. Debra Lam, Pittsburgh's chief of innovation and performance, says the city wants to build stronger links between the tech and sustainability sectors, provide more space for startups and boost diversity within innovation-oriented companies.

One of the most successful examples is the extended San Antonio region. The area had no automotive industry until Toyota in 2005 said it would build an assembly plant in the area, as well as a complex for tier-one suppliers.

Texas officials then tried to draw tier-two suppliers, but many worried they wouldn't find a critical mass of customers, says David Marquez, executive director of the Bexar County economic development agency, which promotes the San Antonio region.

That revelation prompted Marquez to look more closely at the manufacturing network within 640 kilometres (400 miles) of the Toyota plant. His team discovered enough secondary markets for tier-two suppliers to justify the decision to move into the region.

Two years ago, the Texas-Mexico Automotive Supercluster (TMASC) set its sights on attracting five assembly plants by 2020. Marquez notes that while the goal was to leverage the presence of the San Antonio Toyota plant, TMASC hasn't sought to promote the city or county as an investment destination per se. "You have to put your civic pride aside and use the information to build context for the decision-makers you're trying to meet with," he says. "It benefits me if they look at other cities in the region."

While there are clear differences between the TMASC and the Toronto-Waterloo ICT corridor, Marquez says both depend on the health of the regional labour pool. Economic development policies must aim to find ways to make the best use of available talent. "You've got to figure out who your regional collaborators are," he says, "and then collaborate with them."

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