Dr WE (Ted) Hewitt

Boost contract research in Canada's universities

By Dr Ted Hewitt

The 2006 Survey of Intellectual Property Commercialization for the higher education sector was recently released by Statistics Canada. No doubt much of the attention in academic and government quarters will be paid to growth in licensing revenues over the past few years — from about $16.3 million in 1998 to nearly $60 million in 2006 — providing clear evidence to some of an increased focus on commercialization within academia.

Considering that this income in 2006 was generated on claimed intellectual property (IP) expenditures at Canadian universities and research institutes of some $42 million, this represents a healthy 50% return on investment — albeit only a tiny fraction of the total public expenditure on research in Canada in that year.

But as we haggle over the true meaning and impact of such increases in licensing activity and ROI, we remain in danger of overlooking what is one of the most remarkable statistics presented in the survey — the phenomenal value and growth of contract research activity in recent years. In 1998, Canadian universities and affiliated institutes reported income of about $288 million from this source. This number has grown steadily to nearly $1.2 billion in 2006.

In a recent op-ed article in the Globe and Mail, one Canadian university leader opined that Canadians often confuse commercialization with commercially sponsored research. In terms of Canadians' perceptions, this may be true. What can't and shouldn't be overlooked, however, is the tremendous value added through such activity, and in virtually every sector of research and development in Canada. Contract research is big in Canada; and it's big for Canadian business. Not only do Canadian higher education institutions conduct a larger portion of all research than their counterparts in most OECD countries, we are leaders as well in the amount of collaborative research undertaken with industry.

direct involvement with industry

What's this got to do with commercialization? A lot more than many people apparently think. First off, contract research provides incipient opportunities for academic researchers to become acquainted with and engage directly with prospective industrial partners. This is turn leads to the development of more sophisticated understanding on their part of industry needs and how these are best met in a competitive environment. These initial experiences almost always lead to broader researcher engagement with industry both through expanded contract research projects and other means including licensing and start-up company formation.

Second, contract research invariably involves students as key players in the process, providing them with opportunities to develop and implement practical solutions to real challenges and gain hands-on experience in the business milieu. Once they graduate, these students are able to access pathways already established into relevant industries where they are primed to apply what they know to new products and ideas. Some move directly to start up their own small ventures using the knowledge they have obtained on the front lines of industry.

Third, contract research builds partnerships and trust between institutions, academic researchers, and companies, and mutual understanding regarding the goals and objectives of the research process. Companies gain a fundamental appreciation of the value of upstream research, and often move to support this, while researchers better understand companies' needs for faster turnaround, and the importance of the bottom line. In this collaborative environment, companies can achieve the competitive edge they need to compete effectively, especially at the international level.

For a growing number of companies, research investment decisions are increasingly driven by factors such as proximity to research institutions and environments where innovation is prized and new ideas are spawned. Certainly, this was the thinking behind a London digital media company's decision to locate its main research centre on the campus of the University of Western Ontario—all as part of its strategy to expand its global share of the market for point-of-sale electronic merchandising.

Perhaps most importantly of all for this discussion, contract research is invariably linked to the development of the IP that is central to any discussion of commercialization at present in Canada. IP constitutes an appreciable portion of the $60 million in licensing revenue now reported by Canadian institutions. Sometimes this emerges in the form of new products and technologies that can be protected and licensed, earning thousands and even millions of dollars for both university inventors and their Canadian business partners.

Perhaps even more frequently, however, it can be something as simple as a suggested modification or redesign of an existing process which may result in significant cost savings, thus contributing to the corporate bottom line. As an example, a modest research project at the University of Western Ontario sponsored by a petroleum industry giant eventually resulted in a very small, but significant decrease in operating costs that saved the company millions — enhancing productivity and creating new jobs. While the value of such innovations are sometimes extremely hard to quantify, it is nonetheless significant, and carries real value in the marketplace. What we need to do better is capturing this value through better reporting and promotion of success stories.

Expand existing incentives

In the final analysis, it is time to fully recognize the importance of contract and collaborative research in Canada's innovation system, and to look seriously at expanding the array of incentives currently in place to support such activity. These include incentives offered through the Ontario Centres of Excellence and the Natural Sciences and Engineering Research Council's Collaborative R&D program.

Such programs can be far more effective than tax credits which are applied after research investments are made or are non-existent for companies still struggling to turn a profit. In my mind at least, there is no question that this type of activity is the primary driver, now and increasingly in future, behind higher education's contribution to the growth of Canada's industrial and manufacturing sector.

Dr WE (Ted) Hewitt is VP research & international relations at the University of Western Ontario.