Earth to Ontario Premier Kathleen Wynne: Your MaRS mission is looking like Apollo 13.
Instead of becoming "the world's largest innovation hub" (a metaphorical moon landing), your government's Medical and Related Sciences (MaRS) Discovery District is turning out to be a dicey salvage operation that's blowing up in taxpayers' faces.
Good luck with trying to turn this sow's ear into the "silk purse that is our economic future," as Ms. Wynne pledged to do last week. If Ontario's future prosperity hinges on projects like MaRS, Canada's biggest province may be in even bigger trouble than it looks.
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The MaRS saga – which has one arm of the Ontario government repaying MaRS's loan from another arm of the same government on a gleaming but mostly empty office tower – is a cautionary tale of how not to do innovation policy. Top-down attempts to create "innovation hubs" almost never work, especially if they're based on trying to copy one-off successes elsewhere.
That hasn't stopped countless governments from trying. MaRS joins a long list of similarly disappointing efforts across the globe. Duke University technology expert Vivek Wadhwa, who has studied hundreds of such hubs, concludes: "Political leaders long ago held press conferences to claim credit for advancing science and technology, management consultants earned hefty fees and real-estate barons reaped fortunes. Taxpayers were left holding the bag."
MaRS began as an idea 15 years ago, when a group of Toronto academics and corporate philanthropists began pushing for a world-class medical research hub in Canada's biggest city. As disciples of Harvard management professor Michael Porter's "cluster" theory, they wanted to leverage local research in the hopes of commercializing discoveries and transforming Ontario's economy.
Located in an abandoned wing of the old Toronto General Hospital, MaRS would connect medical researchers with entrepreneurs. It would provide mentoring, networking and startup funding to turn ideas into blockbuster new technologies. Billions of private investment dollars and thousands of jobs would follow, creating the same kind of virtuous circle that exists in tech hubs like Silicon Valley and Boston.
In 2003, Progressive Conservative premier Ernie Eves provided $38-million in initial funding to get MaRS off the ground. It was a modest investment that, combined with private and corporate donations, allowed MaRS to provide modest support to fledgling startups.
But MaRS's leaders soon succumbed to empire-building. MaRS expanded its med-tech mandate to include other industries, such as social innovation, information and communications technology (ICT), entertainment and clean tech. No matter that the incursion into ICT duplicated the services of more focused and established ventures, such as Waterloo's Communitech and Invest Ottawa.
The recession temporarily put MaRS's plans for an ultra-modern 20-storey office tower on hold. But the Liberal government of Mr. Eves's successor, Dalton McGuinty, was only too eager to relaunch the project on the eve of the 2011 provincial election with a $224-million loan from Infrastructure Ontario. "We're going to solve some of the most difficult problems facing humanity right here in the middle of this network," innovation minister Glen Murray claimed.
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Now that it's up, the MaRS tower is only 31 per cent leased and MaRS can't service its debts. The government is paying back the loan to itself. It also just bought out a U.S. real-estate developer's stake in the project for $65-million, even though Ms. Wynne has promised to sell assets to ease her government's $12.5-billion deficit.
So far, Ontario taxpayers have plowed about $500-million into MaRS. But that's not the end. Ontario is now contemplating moving hundreds of civil servants (hardly a bunch of innovators) into the high-priced MaRS space.
MaRS's high-powered board of directors continues to stand by management's lofty salaries (the CEO was paid $532,501 last year). The board, led by former Royal Bank CEO Gord Nixon, also continues to claim that MaRS has "delivered more than $3-billion in economic impact" since its 2003 launch.
The latter claim is dubious since MaRS appears to take credit for every job created and every dollar of venture capital raised by its "client" startups, no matter how tangential its role in their expansion. Besides, scaling-up and commercialization are the true measures of success. And no MaRS-mentored startup has come close to entering the major leagues.
"The top-down industry cluster is modern-day snake oil," says Prof. Wadhwa. Any politician who says otherwise is living on another planet.