Atlantic Canada must think global to succeed in knowledge-based economy

Focus on Atlantic Canada innovation

Atlantic Canada-based technology firms must reach out globally to overcome the region's shortcomings. That was a strong message delivered at the Second Regional Atlantic RE$EARCH MONEY Conference, which featured a diverse slate of national and international speakers and panelists. They met in Halifax on November 21st to discuss strategies for meeting the challenges of developing a knowledge-based economy in the midst of unprecedented global competition for talent and financing.

The Halifax conference — entitled National Priorities and Regional Advantages: Opportunities for Atlantic Canada in Canada's Science and Technology Strategy — was heavily focused on developing the region's industrial base. According to Statistics Canada data, business R&D in the region accounted for just 0.2% of the Canada's gross domestic product in 2003, down from 0.27% in 1994.

With a small population base, weak private sector R&D and relentless competition from much larger centres, Atlantic Canada firms are overwhelmingly small with little access to business leadership skills and financing.

"We're in competition for human resources with regions that have well-established industrial bases. Demographics are against us big time so how do we compete?" says Rory Francis, executive director of the PEI Bioalliance. "We have to provide evidence of opportunity. You have to be a ‘somewhere' and PEI has a shot at it. We have a brand."

Ron Keefe, president and CEO of Charlottetown PEI-based Diagnostic Chemicals Ltd (DCL), says his firm has strived in the global marketplace in spite of its location. A strong university environment, good work ethic, entrepreneurial spirit and local government willing to support economic develop have allowed the firm to grow despite a limited experience base and remote capital markets. He points to a strong collaborative system that includes the National Research Council and the Atlantic Canada Opportunities Agency as a key factor in DCL's success.

"We're fighting a losing battle with India and China on intermediate-level products but we can compete on higher-value products," says Keefe.

Developing niche technology strategies and building on strengths is a step in the right direction. So is a multi-sector approach in which government, universities and industry are aligned in common purpose. But over reliance on public funding can jeopardize future gains.

The case of Finland

A case in point is Finland. With a population of five million, it has been unable to replicate the success of its most successful technology company – Nokia – by growing its base of overwhelmingly small high tech companies. The reason, according to Keith Silverang, chairman of Helsinki-based Technopolis Ventures Ltd, is generous yet indiscriminate public support.

"Finland has a high R&D intensity, lots of patent generation, a huge innovation system and $750 million in public funding supports private sector R&D funding. Start-ups can't fail and that's the problem," says Silverang. "There's too much soft money, too much support … Don't take public money and use it like a shotgun. Concentrate the money on the best of the best and don't compete with the private sector. You need to look at outputs or deceive yourself into complacency."

Technopolis is developing a new strategy that will connect Finish R&D to capital markets in North America and Europe where venture capital and management expertise are in abundance.

"Strong public sector orientation means you see things through policy rather than entrepreneurship. You need to empower people," says Silverang. "In Finland, the biggest problem is a lack of talent and leadership. Where do you get CEOs if there is no base of serial entrepreneurs? You take your case to where the money is and seek out local champions, re-locating the firm but keeping the R&D and innovation in Finland."

global approach

Many other speakers picked up on the theme of thinking globally, resisting the lure of public funding and aggressively pursuing niche strategies.

"If a company has been to the small business innovation trough too long, it smells to VC," says John Casey, entrepreneur-in-residence, George Mason Univ's school of public policy. "You need to support the best of the best. If (direct public investment) is spread too thin, it's dumb money."

Growing firms that can compete in a global environment is a near-universal problem that has no easy answer. One organization that aims to build international collaborations is The Hague, Netherlands-based Science Alliance. Managing director Frank Zwetsloot says internationalization is the key to turning small firms into rapidly growing gazelles. He outlined a new organization — the TransAtlantic Research and Business Accelerator — as a possible model for stimulating rapid company growth.

"It's a very big step to become a gazelle," he says. "In Holland, we have a small home market and a lack of R&D capacity so we're seeing the emergence of the micro international company."

He points to Gene Networks International Ltd, a small firm with its headquarters in Tokyo and R&D facilities in Kurume Japan and Cambridge UK, with venture financing from the US and other countries.

academic and government role

The contributing role of strong research-based universities was also stressed by many speakers and delegates, as was the importance of intelligent public intervention and collaboration.

"Atlantic Canada has too much geography and too much history. It has three cultures — four if you count Cape Breton," says May. "The region does not have critical mass so it must seek ways to succeed without it. We need to nurture innovation and entrepreneurship and that's where the Atlantic Innovation Fund comes in. It's a fine piece of public policy ... Innovation is not a process that's amenable to democratic processes. You need to back winners."

May urged the use of Springboard Atlantic which supports the commercialization activities of the region's 14 universities.

"A weak private sector is our major constraint. We need to set up networks and they have to work," he says.

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Note: Due to space limitations, this article covers only a portion of the issues discussed at the conference. Full proceedings will be posted on the RE$EARCH MONEY website in the coming weeks.