Aerospace Clusters: Local or Global Knowledge Spillovers?

Industry and Innovation, Mar 2005 by Niosi, Jorge, Zhegu, Majlinda

In the 1920s, attracted by the first aircraft producers, Pratt & Whitney Canada (P&WC), a subsidiary of US-based United Technologies, started overhauling and repairing American designed and built aircraft engines. After World War II, P&WC started producing small turbines in Montreal, and incorporated local design capabilities for them (De Bresson et al., 1991). Today, the family of P&WC products has expanded. Its engines are entirety designed and manufactured in Montreal, and protected through dozens of US patents (Table4). These engines are found in some Bell Helicopter Canada (BHC) models manufactured in Montreal. P&WC engines are also powering some of Bombardier's models produced in several plants, including those made in Toronto (DHC-8) and Montreal (water bombers CL-215 and CL-415). P&WC has a total of 6,700 employees in its engineering and production facilities in Montreal's southern end. Over 90 per cent of their products are exported.

In 1984-85, with financial support from the Canadian government, BHC, the main American producer of helicopters, transferred its production capabilities for the manufacturing (but not the design) of its civilian helicopters to Montreal. Like Bombardier, BHC also produced incoming international knowledge spillovers. During the next 17 years, the new Mirabel facility of BHC produced over 2,500 copies of seven successful models that were exported throughout the world. Two of these models use P&WC turbines designed and manufactured in Montreal. All others use US-made Allison engines. All models make use of US-designed and -manufactured shafts and other major parts. BHC employs 1,200 personnel in its plant in Montreal's north end. BHC was also attracted by Montreal's labour pool.

Bombardier Aerospace and P&WC represent over 40 per cent of Montreal aerospace employment. When BHC is added, these three companies employ well over 50 per cent of the total aerospace personnel of Montreal.

Other important companies are also prominent in the regional aerospace cluster. Honeywell Canada (a US subsidiary) is another major avionics manufacturer, with global mandates for several products, bringing highly valuable technological knowledge to Montreal. CMC Electronics (975 employees in Montreal), the former Canadian Marconi Corporation, since the late 1990s under Canadian ownership and control, is Canada's main avionics producer. Its products are not incorporated in Bombardier's planes, but exported to other major aircraft producers. H�roux-Devtek, with 650 employees in Montreal, is a producer of landing gear, used in Bombardier jets, among other (mostly foreign) aircraft. French companies Messier-Dowty (landing gear produced entirely for European customers) and Tha�es (avionics and a supplier of Bombardier) also deserve to be mentioned. Another major company in Montreal is CAE, the world's largest producer of flight simulators (4,000 employees in Montreal). In all, over 250 manufacturing small and medium-sized companies at different levels constitute the Montreal aerospace cluster (Figure 2). These small and medium-sized enterprises (SMEs), tier 4 firms, represent not more than 20 per cent of the regional cluster employment and produce parts and components for tier 1, 2 and 3 OEMs. A local network of knowledge flows of lesser proportions thus links the four tiers of the regional pyramid. Figure 2 summarizes the composition and dynamics of the Montreal aerospace cluster.