The Benefits of an Apathetic Anchor: Why Waterloo Adjusted Faster than Ottawa
Why do some communities bounce back from anchor firm collapse more quickly than others? This paper compares Ottawa and Waterloo, two high-technology ecosystems dominated by large, flagship firms, Nortel and Research in Motion (RIM). The Waterloo region adapted rapidly to RIM’s decline, buoyed by the proliferation of local, high-technology startups. By contrast, Nortel’s failure was deeply disruptive. Although Ottawa’s high-technology ecosystem rebounded, recovery was painful, protracted and, in some ways, incomplete. After eliminating several alternative explanations, we conclude that there is a tradeoff in the way communities embed anchor firms. In Ottawa, Nortel was deeply embedded through market-based and associational channels. These ties maximized knowledge spillovers and entrepreneurial recycling as it grew, but simultaneously increased the region’s vulnerability to disruptive shocks. By contrast, RIM was an apathetic anchor. It donated generously to community causes, but was otherwise less engaged within its local, high-technology ecosystem. This distance limited positive spillovers as RIM expanded in the aughts. By creating space for independent enterprises and entrepreneurial programming, however, its apathy enabled the region to capitalize on the opportunities presented by the firm’s decline.
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