Strategic focus and sustained support key to maintaining region's innovation advances

RE$EARCH MONEY Atlantic Conference

Scale, capacity, alignment and continued government assistance are urgently required if the recent economic good fortune of Atlantic Canada is to be sustained, delegates heard at the Third Annual Atlantic RE$EARCH MONEY Conference in St John's NL earlier this month. With the recession providing opportunity to re-think key science, technology and innovation (STI) policies governing the region, consensus among conference speakers and panelists coalesced around the need to forge long-term strategies, fund larger R&D projects, boost technical and entrepreneurial skills and emphasize global markets if the region is to build on future opportunities and impressive advancements achieved over the past decade.

A wide range of R&D assistance programs and the presence of oil and gas (O&G) development in Atlantic Canada have helped to transform the region, with some province's even shedding have-not status as provincial revenues grow and businesses inch up the innovation chain. A further stimulus is about to explode in Newfoundland as the major O&G players begin to devote 0.6% of revenues to R&D.

But without enhanced collaboration amongst industry, academia and government, adjustments to key public support programs and adoption of best practices, recent gains could be lost. Keynote speaker Noel Botha, a founding partner of UK-based Orion Innovations LLP, says successful small nations such as Finland and Norway have developed single integrated innovation policies driven by social and market need.

Botha urged Canadian policy makers to follow suit by adopting five themes for successful innovation policy: significant investment by the public and private sectors, a focus on key industries and/or technologies, balanced technology push and market pull with increased emphasis on major, market-led R&D programs, seamless integration throughout the innovation chain, and initiatives that encourage international R&D collaboration.

Perhaps the most influential organization in the region is the Atlantic Canada Opportunities Agency (ACOA) which has helped to nurture innovative capacity largely through its Atlantic Innovation Fund (AIF). A major presence since its introduction in 2000, the program has pumped $600 million in leveraged funding into a mix of industry- and academia-led collaborative projects and has witnessed increased business input in recent competitive rounds.

A recent ACOA study shows that Atlantic Canada is closing the gap with the rest of Canada and the world on key innovation performance indicators as sectors began to see the benefits of collaboration such as business expenditures on R&D (BERD), greater R&D output from the region's universities and increased provincial support for innovation.

Maintaining the innovation momentum could become more difficult, however, with the impact of the recession spreading throughout the economy and key support programs set to expire. ACOA VP Paul Mills says federal policy makers need to be aware of the importance AIF has played in the region's innovation evolution and competitiveness to date, which he described as a work in progress.

room for improvement

While some indicators show definite progress, others such as the region's success in national R&D programs, the number of post-secondary graduates and inexperienced business management demonstrate that much remains to be achieved. And while increased BERD has been achieved, it's still far lower than the rest of Canada and the Canadian average (20% versus 60%), while Canada in turn lags behind other technologically advanced nations, ranking 16th out of 20 in the OECD.

"It's not a pretty picture … We're not yet fully realizing the economic benefit stream from these projects that we anticipated. We are not seeing the robust commercialization outcomes that we had all hoped for," said Mills. "It takes a hell of a long time to get full commercial potential."

Mills points to four areas that require improvement to increase the innovation potential of the region. These are better alignment of government resources, the attraction, repatriation and retention of highly qualified personnel reflecting the right mix of expertise, access to capital and collaboration.

AIF renewal urged

The immediate task at hand, however, is the renewal of the AIF and the National Research Council's Atlantic cluster initiative. Both have seen two rounds of funding under the previous Liberal government but there's been no indication that the current government is prepared to invest further. Many conference participants assert that this would be a mistake of major proportions.

"We have a good story to tell and we need to build on that … Atlantic Canada's clusters are still not mature enough to compete nationally," says Mills. "We're trying to define our pitch on a go-forward basis. Do we stay the course?"

Mills acknowledges that the $3-million cap on AIF-funded projects is problematic for companies that have started to generate significant sales and need to broaden their offerings and market reach. He says AIF issues worth exploring include larger funding awards for larger projects, future competitions with a sectoral focus, and the funding of more multi-institutional or multi-provincial projects. Mills also noted that Atlantic Canada fares poorly in certain national programs like the former Technology Partnerships Canada and the Centres of Excellence for Commercialization and Research, and suggests that national programs be modified to be more receptive to regional needs.

One area that's not unique to Atlantic Canada is the issue of government procurement, or more accurately, its absence from the Canadian innovation landscape. Business leaders have long stressed the importance of government as a first purchaser, giving companies credibility as they seek to secure markets globally. In the US, the Small Business Innovation Research (SBIR) program pumps billions in R&D funding from 11 federal departments into small, innovative high-tech companies, spurring a remarkable return on investment through new jobs and increased wealth generation. However, Canada appears to be unwilling to replicate SBIR, with many citing restrictive legislation governing the World Trade Organization and the North American Free Trade Agreement.

Despite the hurdles many regional businesses face, there are several that have achieved considerable success and market penetration. The DFB Group has gone from being a $1-million company in 2003 to a global powerhouse with projected sales of more than $100 million this year. The St John's-based manufacturer of storage tanks, offshore stations and barges has succeeded by achieving a stellar safety record in a business with considerable risk (steel welding) and securing customers around the world.

Another firm that has achieved rapid growth is Marport Deep Sea Technologies Inc, which designs and develops products largely for the O&G sector using software-defined sonar. Marport chairman Derrick Rowe says success has been built on the firm's emphasis on product development with extensive customer involvement.

"We engage in customer-driven R&D (and) develop technologies that will sell in several markets," says Rowe. "We seek out market segments and try to dominate them and focus on higher value propositions to pay for R&D."

Rowe says the ocean technology sector is on the cusp of rapid expansion but several key ingredients are missing. He cites the need for government procurement from local companies as well as public funding sources that offer larger sums to growth companies. University research can also assist but it must be targeted to sectors where the opportunities are. Rowe cites the Norwegian innovation model as worth examining and possibly emulating.

R$

Note: Complete conference proceedings are now available at www.researchmoneyinc.com.