Innovation Canada: A Call to Action

Filling the GapsThe budgetary implications of the proposedmodel permit considerable flexibility regardingcost sharing between the federal governmentand the external partners. That said, theinstitutes proposed here would have to developrobust transition plans to ensure initially thateach individual institute is achieving fiscalbalance. These plans would also outlineappropriate metrics of success, the ongoingrealization of which would be a necessarycondition for continued federal contributions totheir operation. The key to success would berequirements that (i) the governance of thebusiness-facing institutes be dominated by theindustry they are intended to serve, (ii) the corefederal support be long term and sufficient toensure dependability and quality and (iii) thefunding contributed by business be a sufficientlylarge proportion of the total budget of eachinstitute to ensure business buy-in andcommitment.The devolution of certain of the NRC’s basicresearch activities to the university sector wouldneed to be accompanied by ongoing federalsupport, but presumably not significantlydifferent from the current and anticipatedamounts. There would also be significant onetimecosts associated with the transition to thenew structure. But these costs should be viewedas a necessary long-term investment in muchimprovedoutcomes for business innovation,driven by more leveraged financing ofcommercially relevant R&D.The Risk Capital GapThe term “risk capital” as used in this reviewrefers to funding of innovation-focussedbusinesses from start-up through to maturity,when the company is ready to access publicfinancial markets or is acquired by another firm(Figure 7.1).Box 7.5 Sectoral Research and Innovation StrategiesThe collaborative R&D institutes proposed in Recommendation 4 would have the potential toplay important roles for tailored, industry-led sector strategies. The CCA’s report oninnovation and business strategy (CCA 2009) underscores that no Canadian sector in Canadais “average.” Each sector is characterized by a wide array of features stemming from amultiplicity of social, economic, cultural, historical and other factors. To illustrate, the reportincludes case studies of four sectors that highlight the great diversity of circumstances. Eachof the case studies can be summarized in a phrase as follows.Auto sector — “weak R&D, but strong productivity”Life sciences — “great promise, but mixed results”Banking — “balancing stability versus radical innovation”Information and communication technologies — “a catalytic role for government.”Just as there is no average sector in Canada, there is no “one size fits all” remedy toCanada’s innovation challenges. Sector-specific expertise and initiatives are paramount, andthe Panel’s proposed large-scale, industry-directed and co-funded institutes could potentiallyserve as a catalyst in that respect.7-11