RE$EARCH MONEY Conference grapples with challenges facing future of corporate R&D

Is Canada lagging in industrial R&D?

Greater direct R&D support for industry is essential to grow the base of existing firms while universities must be given the freedom to pursue fundamental research unfettered by strategies that seek to align academic research to the needs of industry. These were just two of the many provocative assertions that emerged during the March 25th RE$EARCH MONEY Conference as speakers, panelists and attendees tackled a range of issues related to the overall theme: Industrial R&D - Is Canada Really Lagging?

At a time when total value of industry R&D is stagnating — despite a doubling of firms performing R&D over the past decade, — policy makers are increasingly challenged to increase innovative activity while ensuring that the benefits remain in Canada. Recent reports by the Council of Canadian Academies and the Science, Technology and Innovative Council have underscored the urgency of implementing more effective policy, regulatory and programmatic measures.

For keynote speaker Bill Buxton — principal researcher at Microsoft Corp — the current environment for industrial R&D represents a failure of the last 30 years of policy. His solution (one shared with Research In Motion founder and co-CEO Mike Lazaridis) is to allow academic researchers to pursue fundamental research and devise industrial R&D policies that conform to long R&D cycles rather than political terms of office.

"Academic industry-relevant research is neither … The shift in basic to applied research results in a reduction in productivity not an increase," says Buxton, who left academia in 1994 to establish computer graphics firm Alias/Wavefront. "The large wins that cause great companies to happen and are sustainable are almost always … unintended consequences of people doing curiosity-driven research."

For many speakers, the issue of direct versus indirect support for industrial R&D is becoming a defining issue for the future of Canadian competitiveness. Canada largely adheres to indirect mechanisms, the most important being the tax credit system that supports corporate R&D. Other nations, most of which are more innovative than Canada, favour the direct approach, assisting industry through programs, loans and grants.

In a presentation by Dr Fred Gault — who received the first annual RE$EARCH MONEY John de la Mothe Award for Contributions to Science Policy — it was noted that direct government funding for business expenditures on R&D (BERD) were .18% of GDP in the US compared to .02% in Canada. For indirect support, the ratios are reversed. Canada spends .21% on indirect support compared to just .04% in the US. Gault acknowledged that the decision to use one approach over the other "depends on knowing what you want done and having an agenda. That's not necessarily a joke".

Gault also raised the issue of stagnant corporate R&D spending despite the doubling of firms conducting R&D between 1999 and 2007 and wondered why a suitable explanation hasn't emerged. "What is the answer? Industry Canada should want to know," said Gault, who led Statistics Canada's division for science, technology and innovation statistics for many years.

"Government should increase support of the ratio of direct support of R&D," said Sam Stevens, executive director for the Ontario region of the Industrial Research Assistance Program (IRAP). "Right now the automotive sector is in transformation. We need to develop more medium and large firms through direct support and target automotive."

Stevens said it's a mistake to push academia to do more than generate knowledge and produce highly skilled workers. He noted that the Ontario Centres of Excellence program is shifting to an industry pull model which makes more sense from a policy perspective.

Jim Roche, interim president and CEO of CANARIE Inc, says direct support through IRAP or a new entity similar to the defunct Technology Partnerships Canada (TPC) program is essential to grow Canada's base of technology firms.

"SR&ED (scientific research and experimental development) is a peanut butter program. It's typically Canadian. It treats all companies the same and (has) no focus," said Roche. "Take the $3.6 billion for SR&ED and allocate it to IRAP or something like TPC and align it to the sub priorities of STIC (Science, Technology and Innovation Council). It's risky and non-Canadian but it works in industry in other countries and we should do it here."

Canada's reliance on commodity sales have also had a profound impact on the propensity of firms to conduct R&D. Dr Douglas Barber, a distinguished professor-in-residence at McMaster Univ and former CEO of Gennum Corp, said the nation's huge endowment of natural resources has weakened industry resolve to use R&D to add value to its products and services.

"Canada has 0.5% of the global population and 7-10% of global natural resources. It allows us to be purist when it comes to research," said Barber. "US academics are less pure than Canadians. They get about 30% of their salaries from society ... At MIT (Massachusetts Institute of Technology) the mission is for students to change the country and change the world. At McMaster, the mission is to become world class scholars."

industry perspective

Industrial R&D takes on a very different complexity for corporate executives in the trenches. A panel of industry representatives focused on key issues that Canadian-based companies face when competing in the global economy.

"It's all about timing and planning ... We collaborate with our labs in the US and Zurich to try and shorten the time horizon to market," says Raymond Leduc, director and senior location executive with IBM Bromont. "We need a global innovation chain to collaborate with labs around the world. It helps you win a bigger share of the market."

"To be the best, you almost have to take an elitist approach like the Olympics and Own the Podium," says David Miller, senior VP with The Woodbridge Group. "Business and government have to realize we are in a viciously competitive environment and there will be casualties. It's survival of the fittest ... We need to invest in the whole system to gain maximum value."

"Innovation is what brings value to our customers," says Nowlen Mahé, director for the office of the chief scientist at SAP's Montreal office. "We need partnerships to get closer to the customer in all respects."

Note: The full proceedings of the RE$EARCH MONEY Conference will be posted on our web site in the coming days.

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