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Continued Need for Programming

Economic data supports the continued need for innovation programming. Innovation drives productivity which, in turn, determines the wages and standard of living of Canadians. "We have a prosperity gap in Canada – a gap between our potential and actual economic results. This prosperity gap is a productivity gap, and the productivity gap is an innovation gap."7 The prosperity gap accounts for estimated annual losses of: 1) $112 billion in tax revenues for all three orders of government; and 2) $12,900 in after-tax disposable income for each Canadian household.

Furthermore, temporal trends reveal Canada's productivity performance is decreasing: "Since 1984, relative labour productivity in Canada's business sector has fallen from more than 90% of the U.S. level to about 76% in 2007. Over the 1985-2006 period, Canada's average labour productivity growth ranked 15th out of 18 comparator countries in the OECD."8

The department funds research and development, an essential input into the innovation system and one that Canadians see as key to future prosperity. A random telephone survey of 1203 Canadians asked the question: "how important do you think research and development is to Canada's future prosperity (on a scale from 1=not important at all to 10=very important)." Seventy-five percent of Canadians in every region of the country felt research and development was important to future prosperity (rating of 8,9 or 10).9

The focus groups indicated that the department's programming flexibility allows it to fill funding gaps, such as funding of equipment for testing and demonstration, not supported by other programming. In fact, the sub-activities and program terms and conditions allow the department to support a wide range of innovation projects from basic research to market entry. Key informants stated that the department's innovation programming was filling two distinct funding gaps: 1) bridging the gap between pure science and commercialization: most other agencies focus on research; and 2) supporting capital infrastructure: the department is the only funding agency providing this type of support in British Columbia and Saskatchewan. While there were alternative funding sources for certain projects or elements of projects, there was no substitute for departmental funding for approximately half of the projects. They would not have proceeded without departmental support. Specifically, these projects involved the development of information sharing networks, support for incubators and accelerators, the establishment of centres for manufacturing and prototype development, small equipment purchases, and the installation of testing and demonstration equipment. The case studies support the finding that innovation funding was moderately to highly incremental. Of the eight case study projects, five were found to be totally incremental (that is, the project would not have proceeded in the absence of departmental funding) and three of the projects would likely have proceeded, but only after a delay or with a reduced scope (partially incremental). The incrementality of the funding was confirmed in the focus groups. The focus group participants also felt that, despite the department's focus on commercialization, there is still a major gap in transferring research findings and associated intellectual property to the private sector in order to facilitate commercialization.

In contrast to the funded proponents, nine of the ten non-funded organizations had successfully undertaken innovation projects similar to those funded by the department but without departmental support. When asked why they did not approach the department for support, they indicated: 1) they already had funding (3 organizations); 2) they did not know about the department and the support it provides (3 organizations); and 3) they did not believe their project aligned with departmental support (4 organizations).

In summary, most key informants (all proponents, most co-funders and experts) agreed that the department's innovation programming is fulfilling a need and there is a continued need for the funding. However, there were mixed messages related to the usefulness of the funding, particularly going forward. Alternative funding was available for elements of some projects but not others. Focus group participants indicated the department was the "first stop" for funding for some proponents while it augmented funding for other proponents. Some key informants (including proponents, co-funders, experts and staff) felt the department could move toward a long-term funding strategy for priority sectors. Departmental managers indicated the department is currently attempting to implement a long-term strategy for sectors; however; it may not yet be fully achieved in some regions. The focus groups were divided: many would like to see a broader distribution of the types of projects the department funds and reduced focus on infrastructure while others believed the department should develop a more focused strategy for its innovation support.

Alignment with Departmental and Federal government priorities

The Innovation Activity supports the department's strategic outcome of developing and diversifying the western Canadian economy. The 2010-11 Departmental Performance Report states that the department's "approach to innovation aligns with the overall federal approach, which is outlined in the 2007 Science & Technology Strategy10 and in recent initiatives, such as the development of the Digital Economy Strategy11 and the Review of Federal Support to Research and Development12. "The 2011 Speech from the Throne confirmed the Government's continued support for innovation over the next five years as part of its plan to "create the right conditions for growth and job creation".13 Most recently, the government committed to new supports for innovation in its Budget 2012.

Key informants indicated that annual regional and corporate business plans identify priorities that guide project selection. Although regions tend to interpret priorities differently, the Minister is responsible for final project approval thereby bringing some consistency to the process.

Consistency with Federal Roles and Responsibilities

Innovation and productivity determine the living standards of Canadians. The federal government is responsible for: 1) ensuring prosperity across all regions of Canada; and 2) filling funding gaps in research and development that can benefit society. "Business, government, higher education sector and non-profit organizations all play a part in the system of research and development. Their research may be driven by different motivations, but they all contribute to the advancement of knowledge and well-being of Canadians. While their activities overlap, their roles are distinct...government and private non-profit organizations perform and support research for the public good."14

Key informants had mixed opinions on the department's suitability to fund innovation. Some key informants felt the department is more politically neutral than the provinces and therefore able to focus on growing the economy and targeting funding towards meeting unique regional needs. Other key informants disagreed, stating that innovation requires a level of risk and a tolerance for failure that contradicts the government's seemingly risk-averse approach to funding.

 


[7] Source: Institute for Competitiveness and Prosperity, 2011. "Canada's Innovation Imperative".

[8] Source: Council of Canadian Academies, 2009, "Innovation and Business Strategy: Why Canada Falls Short."

[9] Source: Nik Nanos, 2011. "Canadians say R&D Critical to Prosperity".

[10] Public Works and Government Services Canada, 2007. "Mobilizing Science and Technology to Canada’s Advantage." Catalog number Iu4-105/2007E-PDF- check

[11] Industry Canada, 2011. http://www.ic.gc.ca/eic/site/ic1.nsf/eng/06506.html.

[12] Public Works and Government Services Canada, 2011. "Innovation Canada: A Call to Action. Review of Federal Support to Research and Development – Expert Panel Report." Catalog number Cat. No. Iu4-149/2011E-PDF

[13] Speech from the Throne. June 3, 2011. http://www.speech.gc.ca/eng/media.asp?id=1390.

[14] Statistics Canada, 2009. "The ongoing importance of gross domestic expenditures on research and development (GERD)." Innovation Analysis Bulletin, 11(1), pages 11-13. Catalog number 88-003-X.