CCA expert panel takes hard look at factors contributing to Canada's weak industrial R&D performance

An expert panel has concluded that Canadian industrial R&D (IR&D) remains weak for a host of complex, often poorly understand reasons, although four key industries display considerable strength. Assembled by the Council of Canadian Academies (CCA), the panel's report — The State of Industrial R&D in Canada — found that while R&D activity is extensive and spread across a wide range of industries, the relationship between R&D, S&T and innovation is asymmetrical and in need of closer examination.

Containing a wealth of detail on industry R&D activity in Canada, the report also includes patenting and scientific publication patterns by industry, the first time they have been analyzed in detail. Yet many have found the mandate of the expert panel — chaired by Kathleen Sendall, director of Enmax Corp, Calgary and vice chair of Alberta Innovates – Energy and Environmental Solutions — embraces a technology-push definition of R&D and that the five barriers to innovation it identifies reflect a misunderstanding of how IR&D works in relation to industrial innovation.

The report is a follow-up to the CCA's landmark 2009 report, Innovation and Business Strategy: Why Canada Falls Short (R$, April 30/09) and a companion piece to last year's CCA report — The State of Science and Technology in Canada — which showed that Canada punched far above its weight in the S&T realm (R$, October 10/12).

The report was commissioned by Industry Canada under its 10-year funding agreement with the CCA to determine why IR&D is relatively weak and how it impacts on the nation's persistently poor innovative capacity and low productivity.

It confirms the findings of many previous reports on Canada's IR&D performance, and singles out the standard four key sectors where the nation has global R&D strength — aerospace products and parts manufacturing, information and communications technologies (ICT), oil and gas extraction and pharmaceutical medicine manufacturing.

When examined by geographic location, the panel found that Canada's IR&D strengths are clustered in certain parts of the country. Ontario and Quebec are dominant in aerospace, the majority of ICT is found in Ontario, Quebec and British Columbia, oil and gas are most prevalent in BC and Alberta, and pharmaceuticals are most often located in Ontario, Quebec and BC.

The report also goes a step further and examines the alignment of IR&D strengths to S&T strengths (clinical medicine, historical studies, ICT, physics and astronomy, psychology and cognitive science, visual and performing arts) and economic strengths (aerospace, oil and gas extraction, forestry, financial, insurance and real estate, retail and wholesale trade). It points out that while there is "some congruence" between the areas, there is a significant "lack of alignment" that is not fully understood.

Weak IR&D relative to competitor nations has long been a source of concern for policy makers. As a share of GDP, Canada's IR&D performance is now half of that in the US "and declining".

The report concluded that the IR&D intensity gap between Canada and the US is largely due to low IR&D intensity in the manufacturing sector.

outdated classification

Determining where Canada's IR&D strengths lie is also problematic. The report notes that, due to the classification methodologies used by Statistics Canada (that conform to OECD definitions), "the panel suspects that too much IR&D is assigned to the service sector" such as wholesale trade and scientific research and development services " and not enough to manufacturing".

It cites several actions that can be taken for "enhancing the evidence base of the state of IR&D in Canada" including:

• improved assignment of R&D measures to industry;

• improved timelines of internationally comparable data on IR&D intensities;

• additional qualitative measures of IR&D capacity;

• new studies of geographic clustering of R&D activities related to specific industries;

• more sector- and industry-specific studies of R&D performance and industry needs; and,

•monitoring of industry publication and patent data over time.

The report notes that, while IR&D is an important driver of innovation, productivity and competitiveness, it "is not the principle strategy followed by many Canadian firms in maintaining their competitiveness".

will report spark action?

In the past year, Industry Canada has now received at least three major reports on R&D and S&T, which have been augmented by the work of the Conference Board of Canada, World Economic Forum and others. It's also known that the department is working on an update to the 2007 S&T Strategy, begging the question of to what extent the CCA's reports findings and conclusions will inform the new policy and subsequent programs and actions.

"As usual, the report is contributing to a well laid foundation that shows IR&D is thin and contributing to a weak innovation system. Industry Canada wanted the study done and what they are going to do with it is the big question mark," says Paul Dufour a veteran of innovation and science policy. "The report is a great tool but at the end of the day somebody has got to take some action — both governments and the private sector. What is the policy action behind the evidence being provided?"

For his part, Greg Rickford, the recently appointed minister of state for science and technology, acknowledged receipt of the report but said little more than "We look forward to reviewing this report in more detail."

Dufour says that for an effective innovation policy to emerge, action must extend beyond government to all elements of the innovation system including consultation with "people who can make a difference".

"They are commissioning these studies for a reason but what is Industry Canada going to do with it? Industry Canada needs to do a synthesis and develop a check list against which you can say what has been done, what is beyond the responsibility of government and so on. A progress report would be valuable."

A good example is the forthcoming briefing document produced by the Univ of Ottawa's Institute for Science, Society and Policy. Entitled Canada's Future as an Innovative Society: A Decalogue of Policy Criteria, the document is based on a briefing paper written last year by Dr Richard Hawkins, a Univ of Calgary based innovation policy expert (R$, March 15/12). The document will be released in Ottawa on October 3rd to coincide with an address Hawkins will be giving at a Big Thinking event presented by the Federation for the Humanities and Social Sciences.

barriers to knowledge translation

A key element of the IR&D report is the identification of five barriers to effective knowledge translation in Canada. The barriers have been identified as technology transfer, managerial expertise, business support, public procurement and business culture.

These are barriers that have been cited in previous reports and, according to Dr Jeff Crelinsten, are indicative of a mindset that fails to get at the real reasons for innovation and knowledge translation.

"They miss the real issue which is a lack of experience in commerce and a culture that does not value it," says Crelinsten, a principle The Impact Group, co-publisher of RE$EARCH MONEY and co-author with Dr Douglas Barber of a series of papers on firm-level innovation. "They're asking the wrong questions and the model is technology push. It works sometimes but the real benefit is when you create value better than others and that comes from listening to people and gaining insight from users to drive the research."

Crelinsten notes that the expert panel members have considerable expertise in many key areas but are there are few with strong entrepreneurial credentials. "My research shows that Canadian are not risk averse but they are taking stupid risks, not smart risks," he says. "In the US, risk tolerance is similar but they have a culture favourable to commerce and have the expertise."

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