The IPL newsletter: Volume 25, Issue 509

July 15, 2024

News from the IPL

RESEARCH

Semi-Peripheral Pathways to High-Technology Markets: How Organizational Origins Shape Entrepreneurial Ecosystems

Alessandra Cicci & Darius Ornston, Studies in Comparative International Development
This article is co-authored by IPL Affiliated Faculty Darius Ornstonand Master of Global Affairs alumni Alessandra Cicci. Recent technological changes have created new opportunities for small- and medium-sized firms in the semi-periphery to enter digital markets. At the same time, the need to connect startups with the diverse range of actors and resources which sustain an entrepreneurial ecosystem poses a formidable challenge to regions which have historically suffered from disarticulation. The literature suggests that regions aspiring to support technology startups could benefit from bridging organizations or “entrepreneurial ecosystem incubators” (EEIs) to build civic capital. Comparing two successful EEIs in Toronto and Waterloo, Canada, we find that their organizational structure, specifically the composition of their board, shaped connectivity in important ways. Whereas Communitech, an entrepreneur-led EEI in Waterloo, relied heavily on horizontal, peer-to-peer mentoring among entrepreneurs, MaRS, led by established firms and civic leaders, linked startups to external capital, customers, and other resources within a limited number of industry verticals. Both EEIs supported local startup activity, but they fostered different patterns of collaboration and high-technology competition. This analysis suggests that regional leaders in laggard regions may face a tradeoff in how they support technology startups and nurture entrepreneurial ecosystems.

Chip Shot: A Semiconductor Strategy for Canada

Canadian Standards Association
This report was co-authored by IPL Associate Dan Munro. With the semiconductor industry in the midst of technological, geopolitical, and economic change, firms and governments in the United States, China, Europe, India, and elsewhere are making multi-billion-dollar investments to generate and secure advantages. Canada has strengths that could be enhanced with strategic investment. Yet, the inertia that plagues much of the Canadian innovation ecosystem also seems to affect the semiconductor sector. Canada has been slow to act. Canada should focus its semiconductor strategy on better integration with global value chains rather than self-sufficiency. For Canada to be successful in key sectors of the industry, firms and governments should increase funding for research and development, commercialization, and intellectual property protection; develop stronger programs for semiconductor start-ups and scale-ups; enhance semiconductor innovation infrastructure; improve education and career pathways for highly skilled personnel; and strengthen partnerships with major actors in global value chains, especially the United States.

Editor's Pick

Patent Landscape Report - Generative Artificial Intelligence (GenAI)

World Intellectual Property Organization
Generative AI is booming. It is a cutting-edge technology that is poised to disrupt various economic, social, and cultural sectors, and it extends far beyond simple human-like text generation using chatbots. Drawing on original analysis of patent and scientific data, this WIPO patent landscape report on Generative AI provides a snapshot of the patent situation for GenAI. The report covers the latest patent trends for GenAI with a comprehensive and up-to-date understanding of the GenAI patent landscape, alongside insights into its future applications and potential impact. The report explores patents relating to the different modes, models and industrial application areas of GenAI.

Cities & Regions

From regional to global and back again? A future agenda for regional evolution and (de)globalised production networks in regional studies

Henry Wai-chung Yeung, Regional Studies
This paper builds common grounds for a future research agenda in the regional studies of evolutionary economic geography and global production networks. I put forward two ‘troubling themes’ of (geo)politics and heightened risks as the most disruptive forces in today’s increasingly fragmented global economy and argue for their significance in regional studies throughout the post-pandemic 2020s. Massive global change through the reconfiguration of and strategic (de/re)coupling with global production networks will engender new path formation in regional transformation. In this analytical move from the global ‘back again’ to the regional, there are common questions on epistemology (causal explanations) and substantive issues (network/regional resilience, institutions/the state, inequalities/uneven development and new forms of regional policies) for both communities of researchers.

Statistics

European innovation scoreboard

European Commission
The European Innovation Scoreboard provides a comparative assessment of the Research and Innovation performance of EU Member States, other European, and selected third countries. The innovation performance of the European Union continues to improve at a steady pace, reaching a 10% increase since 2017 and a growth of 0.5% between 2023 and 2024. According to the 2024 edition of the European Innovation Scoreboard (EIS) published today, most EU Member States have boosted their innovation performance, but the increase varies strongly from one to another. Between 2023 and 2024, the national innovation performance has increased for 15 Member States, while it has declined for another group of 11. Croatia remained stable. Compared to the last edition: Denmark remains the most innovative EU country followed by Sweden, which led the rankings between 2017-2022.

Innovation Policy

The Chinese EV Dilemma: Subsidized Yet Striking

Scott Kennedy, Center for Strategic and International Studies
This post discusses trade issues regarding Chinese electric vehicles. The author notes that the global war over electric vehicles (EV) has heated up in the past few weeks and threatens to get even hotter in the coming months. On June 12, 2024, the European Commission announced provisional penalty tariffs ranging from 17.4% to 38.1% against EVs imported from China. The European Union’s (EU) move to counter Chinese subsidies followed the Biden administration’s imposition of tariffs in mid-May against a range of high-tech products from China, including 100% tariffs on EVs and 25% on EV batteries.

Government of Canada Launches the First Clean Economy Investment Tax Credits

Natural Resources Canada
This June 21, 2024 press release announces the passing into law of the first four Clean Economy Investment Tax Credits: the Clean Technology ITC, the Carbon Capture, Utilization and Storage (CCUS) ITC, the Clean Technology Manufacturing ITC, and the Clean Hydrogen ITC. With the Royal Assent of Bill C-59, the Fall Economic Statement Implementation Act, 2023, eligible businesses can now apply for and claim the Clean Technology and CCUS ITCs. The Clean Technology ITC and CCUS ITC are anticipated to provide eligible companies approximately $11.4 billion in support through 2027–28.

World Intellectual Property Report 2024

World Intellectual Property Organization
How do economies diversify? Drawing on original analysis of scientific, technological and export data, the World Intellectual Property Report 2024 shows how countries can promote innovation, economic development and sustainability by developing new innovative capabilities.This report explores the need for innovation policies to focus on developing innovation capabilities. It offers a new methodological framework, complemented by three industry case studies – agriculture technology, motorcycle and video games – in Brazil, Finland, India, Italy, Japan, Kenya, Poland and the United States.

Carbon Contracts Strategy Backgrounder

Canada Growth Fund
The Canada Growth Fund "invests in financial instruments that absorb certain risks to encourage private investment in low carbon projects, technologies, businesses, and supply chains." This document summarizes the Canada Growth Fund's approach to offering carbon contracts for difference. CGF is the principal federal entity issuing carbon contracts in Canada, allocating, on a priority basis, up to $7bn (of their $15bn total budget) in funding for their issuance. “Carbon Contract” refers to any transaction with terms linked to the price or cost of carbon. This includes carbon credit offtakes (“CCOs”), carbon contracts for difference (“CfDs”), as well as any other carbon price assurance mechanisms. Also see Clean Prosperity's reaction to this document and the CGF's announcement of the first standardized carbon contract for difference.

Policy Digest

Boost for new National Wealth Fund to unlock private investment

HM Treasury, Department for Energy Security and Net Zero, Department for Business and Trade
This press release by The UK Chancellor Rachel Reeves and the Business Secretary, Jonathan Reynolds announces that the newly-formed government has instructed officials to immediately begin work to align the UK Infrastructure Bank and the British Business Bank under a new National Wealth Fund. Under the Government’s new plans, "the National Wealth Fund will bring together key institutions and a compelling proposition for investors...mobilise billions more in private investment and generate a return for taxpayers...[and] will invest in the new industries of the future."

Also see a pre-election LSE blog post from Daisy Jameson and Mark Howat discussing how the the new government's proposed National Wealth Fund and Great British Energy should be set up to maximize effectiveness and minimize overlap with the existing UK Infrastructure Bank.

The announcement notes that £7.3bn of additional funding will be allocated through the UK Infrastructure Bank so investments can start being made immediately, focusing on further priority sectors and catalysing private investment at an even greater scale. This funding is in addition to existing UKIB funding. As part of the National Wealth Fund reforms will be made to the British Business Bank, which is overseen by the Department for Business and Trade, to ensure it can mobilise the UK’s deep pools of institutional capital by harnessing its pipeline of investments and track record as the UK’s largest investor in venture capital.

Chancellor Rachel Reeves and Ed Miliband, Secretary of State for the Department for Energy Security and Net Zero, have convened a meeting of the National Wealth Fund Taskforce at No11 Downing Street to initiate the creation of the Fund. Chaired by the Green Finance Institute, the Taskforce includes former Bank of England Governor Mark Carney, Barclays CEO C.S Venkatakrishnan, Aviva CEO Dame Amanda Blanc and large institutional investors.

The National Wealth Fund Taskforce's interim report , prepared for the Labour Party in July 2024, Summarizes design principles for the NWF and five key foundational
recommendations to ensure the NWF can be "genuinely additive, driving a step-change in green investment:"

Recommendation 1: The NWF must be empowered to deploy catalytic capital with higher levels of risk appetite against a broad, strategic investment mandate, aligned with government priorities to maximise flexibility and allow the NWF to respond innovatively and with agility to the challenges and opportunities of different sectoral transitions. The NWF will need to pursue the best investment opportunities (in terms of strategic significance, impact on carbon emission reductions, and the ability to crowd in private capital), within this mandate and the economic policy framework. Whilst demonstrating higher risk appetite, this won’t mean only targeting first loss positions and below market rates of return. Instead, it means identifying risks the NWF is uniquely capable of managing. These include ‘First of a Kind’ execution risks where the NWF itself is effectively working with government to develop the market, thus the importance of policy and business models is key. These investments need to succeed if private capital is to support subsequent deals in the same sector so there is likely to be equity upside for the NWF.
Recommendation 2: The NWF must be mandated to deploy a broad range of products and financial instruments, recognising that intervention differs by sector. Equity, deployed at higher levels of risk appetite with a broad range of risk-adjusted returns to attract the broadest investor appetite, is paramount. The ability to also offer concessional debt, guarantees and price assurance products (potentially including contracts for difference and offtake contracts) would enable the NWF to take a ‘Swiss-army-knife’ approach, and deploy capital in a way that most effectively mobilises private capital. Each of these product strategies will require further validation. Where third-party-fund investment aligns with mission and investment needs, this should also be in scope. The NWF should explicitly exclude pure grants from its remit, given their provision unlikely to deliver the expected return on investment. Instead, the NWF should encourage increased coordination and potential aggregation across existing grant-giving organisations.
Recommendation 3: The NWF should crowd in private capital on a deal-by-deal basis, rather than at the fund level, to maximise its catalytic potential in the immediate term. Opportunities to crowd-in fund level capital will be considered as part of the NWF’s medium-term strategy, ncluding any possible impact on the public finances . It will be important that fund strategy, structure and mandate are future-proofed to incorporate fund-level mobilisation. Getting this transition right will be key to fund success in the long term, given the high cost and extensive maintenance required to sustain investments purely at the deal level.
Recommendation 4: For speed-to-market, the NWF’s capital should initially be managed and deployed by an existing organisation(s) in the current UK development finance architecture. UKIB has been highlighted as one potential organisation of best fit. The launch of the NWF should be accompanied by a review of the government-owned development finance institutions with the objective of simplification, building economies of scale and reducing friction for private investors. Improved coordination or consolidation under a single umbrella will allow optimal capital solutions to be deployed across the broadest range of sector needs to deliver net zero. Similarly, other HMG net zero funds and grant-giving activities should be better coordinated or aggregated.
Recommendation 5: The NWF — or the institution that will house it — must operate at arms-length from government; its governance should comprise of an independent Board and independent investment committee with credibility and track record in the market. The case will need to be made for a relaxation of public-sector pay and procurement constraints to attract professionals of sufficient experience and calibre; this is key — alongside clear alignment of interests to ensure that remuneration is intrinsically linked to the success of investment

Events

EVENTS

Technology Transfer Society Annual Meeting 2024

September 11-13, 2024, Brussels, Belgium
The conference theme is 'Blurring Boundaries and Ambiguous Roles: Universities and the Entrepreneurial Ecosystem.' The deadline for abstract submissions is February 15, 2024.

ANNOUNCEMENTS

Economist/Policy Analyst –Innovation and Technology Policy

The OECD Science, Technology and Innovation Directorate is looking for an Economist/Policy Analyst to support the work conducted by the Working Party on Innovation and Technology Policy (TIP). The selected candidate will work on one or several of the activities currently undertaken by the TIP team, depending on the profile and experience of the candidate, including activities in the following three fields: i) science, technology and innovation (STI) and its policies in support of green transitions, including specifically the preservation of biodiversity; ii) skills and ecosystem conditions for STI to support the green and digital transitions, including sectoral cluster policies in the field of advanced manufacturing and needs to support ambitious “moonshot” initiatives and iii) the implications of STI on social, territorial and industrial inclusiveness. This vacancy will be filled as soon as possible, and applications should be submitted no later than midnight CEST 28 May 2024.

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This newsletter is prepared by Travis Southin.
Project manager is David A. Wolfe