Western Economic Diversification Canada
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Executive Summary

Introduction

Innovation is one of five program activities supporting Western Economic Diversification Canada's strategic outcome of a developed and diversified western Canadian economy. The goal of the department's innovation activities is to strengthen the knowledge-based economy in western Canada by: 1) fostering both existing resource or manufacturing industries and new/emerging knowledge-driven industries within western Canada; 2) creating linkages among participants in the innovation system; and 3) investing in equipment and infrastructure to support industry and build capacity.

To achieve its innovation objectives, the department invests in six sub-activity areas:

1) Technology adoption and commercialization: promoting technology adoption and commercialization in the marketplace;
2) Technology linkages: increasing connections among innovation system members;
3) Technology research and development: developing new technologies with commercial potential;
4) Community innovation: increasing technological capacity in communities;
5) Technology skills development: increasing the number of highly qualified workers through training; and
6) Knowledge infrastructure: increasing the physical assets and capacity of a cluster.

This report reveals the findings, conclusions and recommendations of the evaluation of the Innovation Activity, comprising of departmental innovation programming and funded projects therein. The evaluation assessed the relevance and performance of the department's innovation programming and examined all projects approved for funding between fiscal years 2007-08 to 2011-12. The methodology included document/literature review, file and database review, analysis of comparable programs, 76 key informant interviews, 50 project proponent interviews, eight case studies, an outcome assessment of comparator organizations and four focus groups.

Eligible recipients for departmental innovation funding are not-for-profit organizations. A total of 202 innovation projects were approved for funding during the evaluation time period. 33 of the 202 projects were under the Western Economic Partnership Agreements, which was undergoing evaluation concurrently with the innovation programming. To avoid interviewing the proponents of the 33 projects twice, they were excluded from the evaluation of the innovation programming.

Relevance – Continued Need for Programming

The sub-activities and program authority terms and conditions allow the department to support a wide range of innovation projects from basic research to market entry. In fact, the department's programming flexibility allows it to fill funding gaps not supported by other programming. The department's funding filled two gaps of particular importance to recipients: the gap between pure science and commercialization and the gap in capital infrastructure support. Interviewees claim there is still a major gap in transferring research findings and associated intellectual property to the private sector in order to facilitate commercialization. Alternative funding appears to be available for some projects, or parts of projects, but not others. About half of the projects would not have proceeded without department funding. However, the evaluation interviewed 10 organizations that had not received department funding and discovered nine had successfully undertaken innovation projects similar to those funded by the department but without department funding, suggesting there are alternative funding sources for some projects.

Relevance – Alignment with Departmental and Federal Government Priorities

The Innovation Activity aligns with the department's strategic outcome of developing and diversifying the western Canadian economy. The department's innovation approach also aligns with the federal priorities as outlined in the 2007 Science & Technology Strategy, the Digital Economy Strategy, and the Review of Federal Support to Research and Development. In addition, the 2011 Speech from the Throne and Budget 2012 confirmed the government's continued support for innovation.

Relevance – Consistency with Federal Roles and Responsibilities

The Innovation Activity is consistent with the federal government's responsibilities of ensuring prosperity and providing funding for societal benefit. The government plays a distinct role in the system of research and development by performing and supporting research for the public good.

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Performance - Achievement of Expected Outcomes

For the innovation activity as a whole, most projects appeared to successfully realize at least two, and often more, of the immediate outcomes corresponding to the six subactivities. Although it is too early to assess longer term outcomes, projects are expected to contribute to at least two, and often more, of the intermediate outcomes. Given innovation is, by nature, risky, unpredictable and long term, the high success rate raises questions as to how innovative the projects are. The evaluation found evidence to conclude that the department is following a safe funding approach and that the department's approach is short term in ensuring projects successfully meet predetermined short term objectives.

Success factors included the funding that enabled recipients to undertake new activities and provide new services to support industry, departmental staff support in assisting recipients to craft proposals and establish collaborations and the flexibility in application timelines. On the negative side, there were impediments to success. First, insufficient capital or operating funds made some projects unsustainable over the long term. Second, recipients encountered cash flow problems while waiting several months for reimbursement of eligible expenses. Finally, the department requires that recipients spend their annual budget by fiscal year end, which sometimes caused extra cost and risk as recipients were pressured to obtain leading-edge equipment and other resources within short timelines.

The evaluation found that outcomes of projects did not align perfectly to one sub-activity and there were too many unique indicators. The impact of these issues lies in the inability to assess outcomes by sub-activity and in obscuring the impacts of project outcomes through the use of unique indicators.

Performance - Demonstration of Efficiency and Economy

For the most part, the programming appeared to be economical, efficient and cost-effective. It cost the department one dollar to award and manage $12.80 in innovation transfer payments and each department dollar spent was matched by $2.50 from other contributors. Suggested improvements focused on reducing paperwork and effort created by the project development/application, project review/approval and the accounting aspects of the reporting process. Recipients would like clarification regarding department priorities and the purpose of the department's consultation component of the project development phase. Practices that worked well for the department included the open application and early dialogue processes. The advantage of partnerships with co-funders was that the department could benefit from the sector-specific knowledge of those partners and therefore get a good sense of how the project will benefit the intended industrial sector; partnering also reduces the risk involved in funding innovation. Partnerships bring industry stakeholders together in a non-competitive way, moving sectors forward and permitting greater coverage of industry than direct support to companies. On the negative side, it may be unreasonable to expect co-funders to support truly leading edge innovative projects and it is difficult for recipients to find two aligning funding sources at the same time that have similar priorities and are willing to fund the same type of project.

Possible Improvements

Interviewees suggested the department could streamline its application, approval and accounting/reporting processes. The department could provide proponents with clarification on departmental priorities and the purpose of the department's requirement for applicants to consult with others during the project development phase. Finally, the department could review its requirements for funding advances to alleviate some of the cash flow problems faced by proponents.

The department can focus programming on priority areas while at the same time maintaining some of the flexibility that has allowed the department to fill funding gaps and accommodate regional variations and needs. Interviewees suggested the department consider whether to fund not-for-profit organizations and/or companies, and whether to focus on research and/or commercialization outcomes.

Recommendation

The evidence gathered in the evaluation and the analysis thereof supported the following recommendation:

Recommendation 1: The department should review its program delivery processes to streamline programming administration and clarify departmental innovation priorities.