News from the IPL
INTRODUCTION
This newsletter is published by The Innovation Policy Lab at the Munk School of Global Affairs, University of Toronto, and sponsored by the Ministry of Research and Innovation. The views and ideas expressed in this newsletter do not necessarily reflect the views and policies of the Ontario Government.
ANNOUNCEMENTS
US$ 4 BILLION FOR GENOMICS INSTITUTE
In the largest act of US philanthropy for biomedical research, Eli and Edythe Broad have donated $400 million to the Broad Institute, a joint project between Harvard and the Massachusetts Institute of Technology. The gift builds on the $200 million with which the Broads first funded the genomics institute in 2003 and 2004. Many of the institute’s projects, including the HapMap project, the RNAi Consortium, and investigations of cancer genomics, will require several years to yield results. Currently, the Broad is considered a part of MIT for administrative purposes, but is jointly governed by MIT and Harvard, who share overhead costs for the institute. It will continue to be governed by both institutions, but will transition out of MIT’s purview to independent status as a nonprofit organization.
Microsystems and Nanotechnology Centre Opens in Alberta
The Alberta Center for Advanced Microsystems and Nanotechnology Products (ACAMP), funded with $8 million from the provincial Alberta government and $3.5 million from the Canadian government, recently commenced operations in the Edmonton Research Park. The new program will be structured around three central components to assist commercialization in this area: packaging and assembly, product development, and marketing.
Editor's Pick
Compendium of Research Papers: The International Forum on the Creative Economy
The Conference Board of Canada
The documents within this Compendium of Research Papers: The International Forum on the Creative Economy were the result of a two-day learned forum that took place March 2008, in Gatineau, Quebec. Arts and culture industries play a vital role in attracting people, business, and investment, and in distinguishing Canada as a dynamic and exciting place to live and work. The Conference Board estimates that the economic footprint of Canada’s culture sector was $84.6 billion in 2007, or 7.4 per cent of Canada’s total real GDP, including direct, indirect, and induced contributions. Culture sector employment exceeded 1.1 million jobs in 2007. This research was part of a multi-faceted project completed in collaboration with the Department of Canadian Heritage. The forum, brought together 200 scholars, researchers, professionals, industry leaders, and public officials from across Canada and around the world. This compendium report includes academic papers from leading researchers from around the world.
Valuing Culture: Measuring and Understanding Canada’s Creative Economy
The Conference Board of Canada
Valuing Culture: Measuring and Understanding Canada’s Creative Economy examines the culture sector as a cornerstone of the creative economy. Arts and culture industries play a vital role in attracting people, business, and investment, and in distinguishing Canada as a dynamic and exciting place to live and work. The Conference Board estimates that the economic footprint of Canada’s culture sector was $84.6 billion in 2007, or 7.4 per cent of Canada’s total real GDP, including direct, indirect, and induced contributions. Culture sector employment exceeded 1.1 million jobs in 2007. Technology is revolutionizing business models in the creative economy, altering the way culture is created and consumed. Consumers are becoming “prosumers” who actively create and customize content. The “long tail” business model of many niche markets is altering how arts and culture industries sell their products and services. The culture sector bridges geographical distances and creates greatly expanded social networks.
Innovation Policy
Review of Innovation Policy: China
OECD
OECD Reviews of Innovation Policy offer a comprehensive assessment of the innovation system of individual OECD member and non-member countries, focusing on the role of policy and government. The Chinese government has launched a national strategy to build an innovation-driven economy and society by 2020. Will China be able to succeed in making this challenging transition? This report assesses the current status of China’s national innovation system and policies, and recommends improvements required in both the policy and institutional environments for China to succeed in promoting innovation through a market-based approach.
Elisa Giuliani and Valeria Arza, SPRU
Most of the literature on university-industry (U-I) linkages assumes that these linkages will be beneficial. This paper questions this assumption and suggests that not all U-I linkages are equally valuable. This paper explores the factors driving the formation of valuable linkages, defined as those that have a higher potential to diffuse knowledge to other firms in the economy. It estimates a two-stage Heckman model using data from two wine clusters in Chile and in Italy. The quality of firms and universities is found to be a key driver of valuable U-I linkages. The paper concludes that selectivity by policy makers should be encouraged when they promote U-I linkage.
The Economics of Knowledge and the Governance of Universities’ Third Stream Activities
Federica Rossi, BRICK-DIME
In the course of the last few decades, universities have been increasingly involved in third stream activities, which often result in increased interactions with firms aimed at the creation, dissemination and exploitation of knowledge. The purpose of this paper
is to develop a theoretical framework in order to understand the economic incentives underpinning firms’ and universities’ mutual engagement in third stream activities, as well as the economic rationale underpinning the introduction of public incentives supporting these activities. The paper argues that the tools of the economics of knowledge and the conceptualization of knowledge production as an activity characterized by complexity, uncertainty, path dependency, idiosyncrasy and ambiguous appropriability conditions, can fulfill these objectives.
High Impact Firms: Gazelles Revisited
Zoltan Acs, William Parsons and Spencer Tracey
Gazelles, a small subset of firms that grow rapidly over a period of years, are believed by many to have a disproportionate impact on the U.S. economy. Though the precise definition of gazelle firms differs between studies, these businesses are recognized as a dominant force in economic and employment growth. This paper confirms this belief by finding that a very small percentage of firms are responsible for almost all revenue employment growth in the U.S. These high-growth firms can exist in any industry, but on average, they are younger than the average business. Still, the average age for a high-growth firm is 25 years, older than the nascent businesses that are the focus of much TBED activity and regional growth strategies. The study suggests that regional and state policymakers should follow a balanced approach that supports both new and expanding businesses.
Cities, Clusters & Regions
What Drives Innovative Output in Emerging Clusters? Evidence from the Wine Industry
Elisa Giuliani, SPRU
This paper explores the drivers of innovative output of firms that belong to emerging clusters, defined as those clusters that are not as ‘vibrant’ or leading as e.g. Silicon Valley, but yet strive to emerge in the international competition. Using evidence from two wine clusters in Italy and Chile, this paper finds that firms’ internal knowledge bases and their external openness are more significant than intra-cluster network embeddedness in explaining innovation. In particular, the paper tests for two competing structural positions within the intra-cluster knowledge network – network closure and structural holes – and finds that network closure affects innovation but with diminishing returns. However, this variable looses significance when accounting for external openness. Implications for managers of emerging clusters are noted.
Statistics & Indicators
2006 Industrial R&D Intensity per State
According to National Science Foundation (NSF) data released two weeks ago, companies spent in aggregate $247.7 billion on R&D expenditures performed in the U.S. in 2006. Leading the nation was California, with $58.4 billion in industrial R&D, followed by Michigan ($16.5 billion), Massachusetts ($15.6 billion), New Jersey ($14.6 billion), and Texas ($13.3 billion). SSTI has prepared a table presenting the state rankings for industrial R&D performed in 2006, the per-state gross state product in 2006, and each state’s industrial R&D intensity. The industrial R&D intensity is the ratio of industry-based R&D to the gross state product. Using these calculations, Massachusetts experienced the largest industrial R&D intensity in 2006, at 4.64 percent. This was followed by Michigan (4.38 percent), Connecticut (4.04 percent), Washington (3.89 percent), and California (3.35 percent). The industrial R&D intensity for the U.S. as a whole was calculated to be 1.89 percent.
Policy Digest
Terry Matthews, CATA
Canada prides itself on being a technologically advanced nation, with a vibrant and successful telecommunications and computer systems sector. Given our geography, it was only natural that Canadian institutions and companies would focus on the rapidly growing field of telecommunications. So when data processing and telecommunications, driven by incredible advances in both areas, merged into a gigantic global industry over the last half century, Canada was already well positioned. Over the decades, literally thousands of companies employing hundreds of thousands of highly skilled Canadians, have created many billions of dollars of value for their companies and the nation. But the world is still changing rapidly, and our advantage is quickly slipping away in today’s globalized technology and business environment. Today, the telecommunications component of the ICT sector is in serious difficulty, as evidenced by the rapid decline of the once famous “Ottawa Telecom Cluster”. While the Ottawa companies may be the ‘canary in the coal mine’, many of the same problems are now being experienced by Information and Communications Technologies (ICT) companies in other parts of Canada as well. This paper outlines some of the factors affecting Canada’s ICT sector, and proposes some measures that would assist the entire high-technology field.
Despite a few high profile Canadian successes, global brand companies like Nortel and RIM are the exception, not the rule. For those that did out last the ‘90s, their main challenge today is often basic survival, rather than managing growth. Regrettably, just when some of our Canadian companies are finding their feet again, the industry finds itself plagued by numerous new afflictions.
The ongoing problems with Ottawa’s “telecom cluster” are thus continuing, and having an impact on local unemployment rates. Further job losses are probable. Unfortunately, a similar trend is now emerging in other aspects of the IT and Telecommunications (ICT) industrial sector, across Canada.
The causes of this “perfect storm” that is overwhelming the Canadian ICT industry can be traced to the following six factors. Matthews also presents a range of solutions to these issues.
The lack of venture capital:
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Canada should examine the possibility of eliminating capital gains on investments in leading edge technology companies, thereby helping to address concerns raised by the OECD, which has cited Canada as one of several nations with particularly high tax rates on capital. SR&ED and NRC-IRAP records can be used to differentiate companies engaged in technology research and related product development.
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To compensate for the loss of the former “Technology Partnerships Canada” (TPC) program, either the replacement “Strategic Aerospace and Defence Initiative” (SADI) should be broadened to include other functional areas, or similar targeted programs established for which the ICT and other sectors can qualify. Any such program needs to be flexible and quick to respond, so as to be an effective partner for today’s fast moving technology industries.
Canada’s tax treatment of foreign private investors:
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Immediate action needs to be taken to implement the Budget 2008 provisions, and then to go beyond this to eliminate the Section 116 Certificate requirement completely, since the impact far outweighs the benefits of ensuring Canada’s tax rules are being adhered to. Additional steps may need to be taken to ensure that foreign holdings in Canadian technology SMEs not yet traded on public markets are considered “excluded property” for purposes of Section 116 of the Tax Act.
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The proposed changes in tax treatment of American Limited Liability Companies (LLCs) first announced in Budget 2007 and addressed in the Tax Treaty amendments of September 2007, need to be implemented as quickly as possible. Similar provisions need to be extended to Japanese and other LLCs so as to encourage their investing in Canadian technology companies.
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An active international marketing campaign targeted specifically at foreign equity sources, and particularly U.S. based venture capital funds, will then need to be undertaken in order that these investors, many of whom no longer focus on Canada, are made aware of these changes, and appreciate that Canada welcomes their investment in our technology SMEs.
The effect of Canada’s rising dollar:
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While lower corporate tax rates are certainly helpful for profitable companies, in order to assist Canadian technology SMEs manufacturing in Canada (including those not currently profitable), programs should be introduced to provide further acceleration of capital equipment write-offs for manufacturing, combined with refundable tax credits or direct grants & contributions support for acquisition of advanced manufacturing systems and equipment for those not yet able to benefit from tax relief measures.
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Existing SMEs directly engaged in manufacturing need to be assisted to ‘move up the value chain’, concentrating on more complex, specialized and customized equipments where lowest unit cost is not as critical to success. Such more advanced manufacturing jobs will also be more likely to sustain the present significant wage advantage of manufacturing hourly average pay compared to retail hourly pay.
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The federal and provincial governments need to work together to expand funded participation by high-tech SMEs in trade missions and shows abroad, for those interested in, and capable of, selling into the region the mission is targeting.
Low levels of business funded and managed R&D:
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More serious reform of the current SR&ED tax credits system to increase the availability of refundable tax credits for high-tech SMEs, and remove artificial impediments to access to the program for Canadian controlled corporations, should be undertaken without delay, so as to keep Canada’s SR&ED system competitive with that of other jurisdictions. Provincial governments should be encouraged to immediately adopt any federal reforms so as to ensure program consistency.
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In addition to improving the existing refundable tax credit aspect of the SR&ED tax provisions for small Canadian controlled private corporations, the federal and provincial governments should consider a program of direct subvention in support of new product development in technology based companies less than four years old and not yet taxable. For example, 50/50 cost sharing on the salaries of engineers, technologists and scientists directly engaged in product development activities would pull in significant new private sector investment, and encourage established companies to ‘spin-off’ new companies to develop new products and services to support their market needs.
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To address concerns of the business community regarding the high marginal effective tax burden on business investments, efforts should continue to encourage provincial governments to reduce business tax rates for investments in innovation, and the federal government should continue to seek opportunities to similarly reduce the effective tax rate on business capital.
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NRC’s highly successful IRAP program needs to be updated, and the annual maximum contribution agreement for an SME’s R&D program should be increased from $500K to $2 Million, with the overall program funding increased accordingly. IRAP’s management advisory support services should similarly be expanded so as to provide greater benefit to Canadian technology SMEs.
The importance of government procurement:
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Canadian federal and provincial procurement practices need to be reformed to ensure departments are required to consider the impacts of their requirements and processes on potential Canadian suppliers, with a view to ensuring a ‘level-playing-field’ for existing Canadian products able to meet their operational needs.
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An adequately funded program needs to be established whereby Canadian technology companies can once again submit unsolicited proposals to departments that would allow for development and evaluation of Canadian technology products and services to meet departmental needs, prior to their full commercial availability.
Loss of ‘critical mass’ to attract high tech support companies:
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One aspect of Canada’s ‘National Innovation Strategy’, to which the Science, Technology and Innovation Council is currently contributing, should be to recognize both the inherent value of designating the specific ‘technology clusters’ that have developed in various parts of Canada, and to bring forward practical measures to ensure their continuing health.
The growing shortage of adequate expertise:
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Processing times for badly needed management and technology professionals must be drastically reduced if our high-tech companies are to find the people they need to grow and prosper. Special emphasis also needs to be placed on encouraging experienced technology company managers to take two to five year assignments with Canadian companies, including rapid processing of temporary worker applications in this field, favourable tax treatment and direct support for relocation costs.
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To address the need for the more ‘business savvy’ senior managers that Canadian companies need to grow and succeed in the global marketplace, the Labour Programs division of HRSDC should consider funding business training courses for managers of high-tech SMEs, in coordination with the respected NRC IRAP system, which can assist in identifying needs.
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SSHRC should continue to be encouraged to fund additional university grants and fellowships in business management, with a specific focus on the specialized skills associated with bringing young high-tech SMEs from start-up to mature global player.
Events
Newcastle, UK, 4-5 September, 2008
It is generally acknowledged that regional economic success in Europe is dependent on an orientation towards a knowledge-based economy, typified either by high value added, creative and science-based industry, or a focus on advanced business services. For those regions lacking such advantages the emphasis of policy has been placed on developing new clusters of knowledge-based industries through a variety of measures including networking activities, university-based initiatives and support for new start-ups. A key problem though has been the absence of a clear understanding of what would constitute progress towards a knowledge-based economy, never mind what should be the most appropriate policies. One particular problem is the lack of consensus between quantitative and qualitative researchers on how to assess the state of the knowledge base and on the nature of the policy objectives. Through the inclusion of varieties of approaches to exploring the regional knowledge economy this seminar will offer opportunities to draw comparisons between the findings of various research strategies. In so doing, the seminar will stimulate a dialogue within which new developments may be initiated to bridge the various research communities and thereby offer new insights into the role of knowledge in regional economic development and subsequent policy implications
International Benchmarking Forum 2008
Basel, Switzerland, 3-8 September, 2008
What makes a city region attractive for business and people? Which economic policy areas have what impact on regional attractiveness? How do city regions explain their own attractiveness? These questions are the focus of this year’s International Benchmarking Forum – the annual highlight of BAK Basel Economics’ International Benchmarking Program (IBP) . Regional Attractiveness is the main topic of the 2008 conference: Each of the issues Migration and Population, Urban Renewal through Conversion, Quality of Life and High End Innovation will be introduced by a BAK economist presenting an input. Representatives from the benchmark cities Madrid (subtopic: Migration and Population), Berlin (Quality of Life), Manchester (Urban Renewal through Conversion) and Singapore (High End Innovation) have been invited to present policy measures and experiences in their respective fields.
Building High Performance Regions: Cluster Facilitator Training
Saskatchewan, 17-19 and 23-25 September, 2008
Active cluster development requires hands-on facilitation, ideally from trained facilitators within the locality. In response to this need, Cluster Navigators has developed an interactive cluster training workshop to introduce the process of
cluster development and equip facilitators with the necessary skills. These training workshops have been presented worldwide in 30 countries and are based on a systematic Five Phase, Twelve Step process. The three-day program provides an opportunity to take a number of local clusters through the development process. Clusters are selected from those that course participants are familiar with, and provide an opportunity to ‘learn by doing’.
Mexico City, 22-24 September, 2008
GLOBELICS (Global Network for Economics of Learning, Innovation, and Competence Building Systems) is an international network of scholars who apply the concept of “learning, innovation, and competence building system” (LICS) as their framework and are dedicated to the strengthening of LICS in developing countries, emerging economies and societies in transition. The research aims at locating unique systemic features as well as generic good practices to enlighten policy making relating to innovation, competence building, international competitiveness, regional development, labor market and human capital development. In an increasingly global and knowledge-based competition, management strategies need to be based upon an understanding of these framework conditions and the public policies which seek to regulate the environment. For the sixth conference to be held in Mexico City papers that contribute to the understanding of ‘Styles’ or modes of Development (or Political Economy of Development): paradigms of public policies, conflicts, trade-offs and choices among alternative public policies will be welcome.
Cluster Policy in European Regions
Berlin, Germany, 22-24 September, 2008
This international conference provides the participants with information on current development of European cluster initiatives and efficient cluster management policies. International experts will demonstrate a wide range of solutions for national and regional authorities in thought-provoking presentations and workshops.
PRIME International Conference 2008
Mexico City, 24-26 September, 2008
Both the Latin American and European countries recognize that innovation and knowledge are central to the future growth and vitality of their economies and the improvement of quality of life of their citizens. To be successful policies aimed at encouraging research and innovation should recognize the importance of specific institutional arrangements and adaptation to the different sectors and knowledge fields. The Europe-Latin America Conference on Science and Innovation Policy will explore the research/knowledge base, the factual and the normative principles that inform those policies, taking account of the current dynamic international context, promoting mutual learning between the communities of researchers, analysts, R&D managers and policy makers. The aim of the conference is: to stimulate the exchange of experiences about science, technology and innovation policies in Latin America and European countries to promote mutual learning, improve the quality of the research in the field, enhance the impact of the research in the policy making and foster the diffusion of the best practices amongst countries of Europe and Latin America, considering an adequate balance between convergence and diversity.
GLOBELICS International Conference 2008
Mexico City, 24-26 September, 2008
For the sixth conference to be held in Mexico City papers that contribute to the understanding of ‘Styles’ or modes of Development (or Political Economy of Development): paradigms of public policies, conflicts, trade-offs and choices among alternative public policies will be welcome. The conference will be organized around the following themes on the following issues: Innovation, economic development and inequality (Education, Health, Employment, Migration, Gender Equity, Income Distribution). The conditions for developing sustainable systems of innovation. Biofuel, energy systems, water supply, transport, tourism and sustainable development. The role of new ‘horizontal technologies’ (ICTs and biotechnologies). Innovation in indigenous knowledge systems and in traditional sectors (e.g. agriculture, handcraft, clothing, eco-tourism, etc.). Factors affecting differences in economic growth rates: convergence vs divergence in productivity and welfare standards. Patterns of sectoral catching-up. Globalization, autonomy/openness and development. The links between microeconomic learning and macroeconomic policies. Forces inducing learning and the expansion of domestic technological capabilities. Innovation, SME and local development. Factors of attractiveness and embeddedness of the MNCs in local/regional/national systems. Privatization of knowledge, Intellectual Property Right (IPR) and development. International cooperation and national innovation policies to face global challenges (poverty, diseases, natural disasters).
5th Annual Conference of The Technopolicy Network: Implementing Regional Innovation Strategies 
Halifax, Nova Scotia, 25-26 September, 2008
The fifth annual conference of the Technopolicy Network will focus on the development and implementation of various regional strategies across the world. Over the course of two days, several international speakers will give insight and address topics including why a regional innovation strategy is essential, what kinds of strategies have been developed, and how to organise the different elements of a successful region. The opportunity to exchange experiences through connecting questions and answers from participants in a network auction will also be provided.
St. John’s, Newfoundland and Labrador, 16-18 October, 2008
The Leslie Harris Centre of Regional Policy and Development, Memorial University of Newfoundland is hosting an International Conference, with over 90 submissions received with themes ranging from:How to identify opportunities and challenges to knowledge sharing; How to work with the media in connecting research to the community; How to translate knowledge to influence policy and decision-making; How communities and non-governmental organizations can “reach in” to influence research and knowledge generation; How outreach centres can evaluate and maximize their impact; How institutions in other countries are doing it, from Iceland and Ireland, to the U.S. and the Philippines; How Canada’s research funding councils are developing knowledge transfer and knowledge mobilization strategies.
Regional Comparative Advantage and Knowledge-Based Entrepreneurship
Amsterdam, Netherlands, 9-10 October, 2008
The organizers invite submissions for empirical and theoretical papers on the financing of knowledge-based entrepreneurial firms, on the influence of venture capital on firms’ ability to translate technological advances into successful products, and on the contribution of knowledge-based entrepreneurship to regional dynamics.
Seville, Spain, 16-17 October, 2008
Following the success of 2004 and 2006 events, the International Seville Conference on Future-Oriented Technology Analysis (FTA) has become a major occasion for FTA experts, practitioners and decision-makers to bring their ideas and knowledge together in a highly interactive environment. As with previous FTA events, the 2008 Conference places emphasis on diversity of views by attracting participants from a wide geographical base. Academics, practitioners as well as public and private sector decision makers from Europe, North America, Asia, Latin America, Africa and Australasia are invited to broaden the network and to increase understanding of advances in the field of FTA.
The 5th International Conference on Innovation and Management (ICIM2008)
Maastricht, Netherlands, 10-11 December, 2008
Organized by UNU-MERIT (The Netherlands) and supported by Wuhan University of Technology (China) and Yamaguchi University (Japan), This conference will bring together academics, practitioners and other professionals involved in the filed of innovation and management. The conference format includes plenary and parallel sessions with both academic and practitioner presentations and workshops. In addition, the conference will provide networking opportunities together with a taste of local culture.
Understanding and Shaping Regions: Spatial, Social and Economic Futures
Leuven, Belgium, 6-8 April, 2008
Many topics will be discussed such as regional policy and evaluation, regions as innovative hubs, economic restructuring and regional transformation, and local and regional economic development. Abstract submission deadline: Sunday, 4th January 2009.
Glasgow, Scotland, 17-19 June, 2008
Triple Helix VII offers a multi-disciplinary forum for experts from universities, industry and government. The Conference is designed to attract leading authorities from across the world who will share their knowledge and experience, drawing a link between research, policy, and practice in sustainable development. The Conference will bring together policy-makers, academics, researchers, postgraduate students, and key representatives from business and industry. The theme for Triple Helix VII – “The role of Triple Helix in the Global Agenda of Innovation, Competitiveness and Sustainability” – reflects the interaction between academia, the private and the public sector.
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This newsletter is prepared by Jen Nelles.
Project manager is David A. Wolfe.