Tuesday, March 02, 2010

Innovation Watch

The Government of Canada looks likely to focus a key part of its budget this week on investments related to productivity and innovation. The concern is that Canada has “lost the plot” with innovation – rather than being number one in the world, which was the plan, we are fourteenth amongst seventeen nations as measured by the Conference Board of Canada. What should the budget contain?

What we have done in the past is to invest in university research, development and commercialization activities in the vain hope that this would produce great commercial outcomes. The reality, plain for all to see, is that it has yet to do so. The roughly $14 billion annual investment in R&D at our universities produces but modest returns. In part this is because universities, by and large, are simply not designed to create commercial value from ideas and in part because they lack incentives to do so.

Is the solution to spend even more on our universities to try and fix the path to commercialization? No. The real solution is to focus energy on where innovation really takes place – in firms. Rather than boost spending on R&D, the government should use any new funds to significantly boost IRAP – the Industrial Research Assistance Program – and to create incentives for private and public partnerships. More specifically, it should seek to make focused and strategic investments in key industry sectors we want to grow and minimize investments in dying industry sectors.

A second investment we need to see is a massive boost to funding for post-graduate student places, especially those with a co-op component or post doctoral positions in firms. Increasing the ability of firms to leverage ideas and innovation is key. Those countries ahead of us in the league table have more post-grads in the workforce in real firms than Canada does.

Third, the Government of Canada, working in partnership with the Colleges and Polytechnic institutions, should invest in the applied research they are engaged in. These institutions are close to industry, provide them with skilled people and do critical (and relatively inexpensive) applied work. Their work on the innovation agenda should be recognized and funded accordingly.

Finally, we should address the real lack of tier one venture capital in this country. Whether its Ontario, BC or Alberta, companies need to be “fed” two things – risk capital supported by expert managerial talent and realistic, current market intelligence. Tier one venture firms do this – banks and angel investors do not.

There are some other things that matter. The Federal Government needs to partner closely with the Provinces in developing appropriate local innovation strategies; it needs to simplify the processes it uses for securing IRAP funds; it needs to start pooling its intelligence; it needs to stop believing its own press releases and start getting realistic about the challenges facing Canada over the next twenty five years. Its time for some leadership and courage on the innovation file.

The Government of Canada also needs to stand firm in the interests of Canadian firms and researchers against the persistent demands of the WTO and the US as they relate to intellectual property. The demands from these organization represent an attempt to behave as a colonial power as far as knowledge is concerned. Canada should, in partnership with other countries who are also balking at the hegemony of intellectual property law demands of the US, show what a twenty first century collaborative intellectual property regime could look like.

There is a lot to do. We will see this week whether or not the Government of Canada understands the challenge and has the courage to act. Don’t hold your breath.

1 comment:

GrokIam said...


I am part of a startup (less than 1 year old, less than 10 employees), and hoping to be a SME and then a MNE some day! This, after over 20 years in the applied r&D part of the Innovation System. I now have first-hand experience in what a startup needs, as well as some knowledge of the broad policy context.

I support a lot of your recommendations and provide the following SME context.

A. Typical "Time to Commercialization" for:
- a university researcher is 3-15 years, if ever
- for a MNE (multinational) is 1-5 years
- for a SME (small, medium-sized enterprise) is 3-18 months

B. 90%+ of Canadian firms are SMEs

C. I would say this should conclude that significant policy should focus on startups and SMEs and how to assist them in growing - as they are the source of innovation .

D. What do SMEs need?
- more financial and coaching/mentoring support like IRAP
- more support to bring on experienced management/marketing talent
- some, but not a lot of company leveraging required. 20-30% company contribution to 70-80% innovation policy support is about right
- reasonable (could I ask for simple and consistent?) application and reporting requirements to programs
- a service that advises on structuring a company for investment, and a strong program of angel and VC introductions/matching

Our startup is doing fine, but the Innovation System could be a bit smoother if the culture gap between university-based research and startup innovation was recognized and more focus and support was given to the startups/SMEs.