A stronger emphasis on development by governments and research-funding organizations may be helping Canadian entrepreneurs get their innovations to market faster. But experts say a stubborn innovation gap remains, particularly in life sciences.
“An awareness of the need for enhanced commercialization has certainly grown in the past two to five years,” said Daniel Muzyka, dean of the Sauder School of Business at the University of British Columbia. “But it’s still unclear whether we’re speeding up the process.”
He’s researching what can be done to close the innovation gap between concept and commercialization in preparation for a move in August to the presidency of the Conference Board of Canada. Key areas Mr. Muzyka identified as continuing to hinder Canadian innovation are the small size of the venture-capital market and a lack of co-ordination of programs and mentorships to help entrepreneurs move out of the research stage into development.
He recognizes there is more emphasis on commercialization by the federal and provincial governments and a proliferation of initiatives in universities across the country. “But we need better co-ordination of the multiple players and multiple streams of research.”
That was a key recommendation of a report by an independent panel on federal research and development (R&D) support. Canada excels in research but lags behind much of the rest of the developed world in commercialization of innovation, concluded last fall’s study headed by Tom Jenkins, chief strategy officer of OpenText Corp.
“Studies have repeatedly documented that business innovation in Canada lags behind other highly developed countries,” the panel’s report warned. “This gap is of vital concern because innovation is the ultimate source of the long-term competitiveness of businesses and the quality of life of Canadians. The ability to conjure up new products and services, to find novel uses for existing products and to develop new markets ... are the tools that will ensure Canada’s success in the 21st century.”
The Jenkins report recommended creating an Industrial Research and Innovation Council, with a mandate for developing business innovation strategies and talent, and improving the impact of programs through consolidation.
The latest federal budget doubled the money available for grants through the National Research Council’s Industrial Research Assistance Program. Science minister Gary Goodyear also pointed out, as the budget was released in March, that Ottawa wants to stimulate private sector investment in R&D and consolidate science and technology programs.
A sister organization, the Natural Science and Engineering Research Council of Canada (NSERC), is also boosting its efforts to connect researchers with the business community. The council has held 110 networking events across the country in the past two years that have created 1,500 new working relationships, 72 per cent of them between researchers and small businesses, said Janet Walden, vice-president of research partnerships. “This kind of match-making certainly wouldn’t have happened at that rate in the past.”
The council’s Idea to Innovation Grants program has seen 17 per cent of 170 research development projects it has funded result in products that made it to market. Historically, only about 10 per cent of research leads to commercialization, Ms. Walden said.
The program helps entrepreneurs analyze the market demand and then finds partners and provides joint financing. “Finding the right people to help with development is always a barrier; researchers often don’t know where to turn,” Ms. Walden explained.
NSERC is also developing a joint program with another federal granting agency, the Canadian Institutes of Health Research, to help find partners to stimulate commercialization of health and medical products, which tend to have substantially longer time frames and needs for continuing grants and financing than technological innovations, Ms. Walden said.
That inherent difference in the testing and approvals time for commercializing life sciences has still not been addressed, said Dr. Calvin Stiller, director of the MaRS Discovery District in Toronto and chairman of the Ontario Institute for Cancer Research.
“The sad thing about this is that 60 per cent to 70 per cent of research done in our universities is in life sciences and yet the preponderance of investment in development is in other areas like energy, clean technology and information technology that are beginning to take off. We continue to have such a huge repository of discoveries by basic scientists in treating cancer, Alzheimer’s, arthritis and heart disease that we can’t move forward to prove their effectiveness in humans because there is no capital to support the development.”
A major impediment to investment is that tax rules discourage venture capital. R&D expenses in biotechnology are not allowable as write-offs in a limited partnership, he explained. “And yet it is research and development that we need to get the discovery into testing and developed into a viable product.”
Other high-risk investments do get a tax break. “In oil and gas, investors can write off their investments in dry holes that don’t pay out. These are called ‘flow through write offs’ and money has flowed into oil exploration and film development where such credits are allowed,” Dr. Stiller noted.
The Jenkins report recommended flow through write offs for medical science, but the government hasn’t addressed it. “In the United States such writeoffs are allowed in life sciences and because of that there is much more investment in development,” Dr. Stiller said. “If Canadians don’t keep trying for the gusher, someone else eventually will.
“We risk having the foreign capital come in and translating our innovation into marketable products in the United States, Europe or Asia. We will have done all the tough work of making the discoveries but then putting them on the shelf to be cherry picked and become someone else’s success.”
A limitation for startup entrepreneurs is that they generally have a technical or science background rather than business training, said Shiva Amiri, senior program lead at the Ontario Brain Institute in Toronto. “They can be too focused on their next experiment; they need to start developing their idea into a commercial product.
“We find a lot of funding is geared at financing products ready to go. Because of that we find a lot of promising medical research festers in the lab because there is no opportunity to take things forward to a commercial product.”
The institute has just announced a program to provide up to $50,000 for one year to support the commercialization of discoveries to help diagnose, treat or cure brain conditions. Three of the entrepreneurs will also receive matching funds through the not-for-profit Ontario Centres of Excellence.
Along with the $50,000 grants, the program includes a month-long workshop for entrepreneurs in developing a business plan and starting a company, with trainers brought in from successful firms. It’s not mandatory, but it will be encouraged, Ms. Amiri said.
“We think that advisers and mentors are ideally people like them who can talk about how to be a commercial success, and failures they’ve had along the way, which are also valuable learning experiences.”