Ron Freedman

Who are the Innovators?

By Ron Freedman

There are three important questions that innovation analysts and policymakers still don’t have a good handle on with regard to industrial innovation: “Who? Is doing what? Where?” See if you know the answer to the following questions. Which industry sector has the largest number of R&D performers? Given Canada’s prowess in telecommunications you might be tempted to finger that sector. You’d be wrong by a country mile. According to Statistics Canada, there are 1,034 R&D performers in Computer and Related Services, compared with only 32 in Telecommunication Equipment and 101 in Electronic Parts & Components.

Let’s try another example. Which industry classification has the larger number of R&D performers, Manufacturing or Services? Over 3,300 Services firms undertake R&D, compared with less than 3,000 Manufacturing firms. (Incidentally, all other sectors combined include only around 300 R&D performers.) Within Services and Manufacturing, the top 3 R&D-performing sectors are:

On November 6, Statistics Canada issued an important but little-noticed news release containing data from the 2001 Survey of Intellectual Property Commercialization in the Higher Education Sector.¹ According to the new study, as of March 31/01, Canadian universities and research hospitals had created a total of 673 spin-off companies over the past 40+ years. These companies were projected to have total revenues of $2.5 billion and employment of 18,835 people in FY 2002. Impressive findings indeed, but this wasn’t the interesting part of the release.

More interesting than the spin-off numbers themselves was information about the industry sectors in which the companies were created. StatCan analysts were able to assign a NAICS (industry classification) code to about 3/4 of the companies (others had either ceased operations or were unable to be classified). And here’s the revealing part. Nearly 60% of the companies that had been created were in the Services category, 12% in Manufacturing and 5% in Other Industries (see table following). (Data could not be found for the remaining 24%.)

In other words, of all the university spin-off companies ever created there were five times as many in the Services sector as in Manufacturing. A lot of those firms were probably in Computer and Related Services.

So what?

It’s pretty apparent that the Services sector is an important contributor to innovation in Canada. But you won’t find a single reference to this sector in Achieving Excellence, the federal innovation strategy. Nor will you see any discussion in the reports of the regional innovation summits, just completed.

As a result, we’ll probably end up trying to design a one-size-fits-all strategy to cover manufacturing and services — the twin innovation engines — but really aimed at manufacturing. Manufacturing is vitally important to Canada and deserves its own innovation strategy: After all, it has unique circumstances that the Service sector does not. But Services is also important and requires its own set of solutions. It would be a good thing if policymakers woke up to that fact.

Ron Freedman is co-founder and partner with The Impact Group and co-publisher of RE$EARCH MONEY

¹ For more information, contact Cathy Read, Science, Innovation and Electronic Information Division (cathy.read@statcan.ca, phone: 613-951-3838, fax: 613-951-9920).