Innovation and Commercialization in the Canadian Bioproduct Industry

Pamela Laughland John Cranfield David Sparling

University of Guelph

Motivation

• Industrial biotech an growing area of interest– Shift waste into something of value

• CND’s resource based gives it a competitive advantage vis-à-vis biomass

• Product development process is complex• Gap regarding commercialization and innovation

activities and related drivers• Information gap to help policy makers

understand better firm’s activities, industry structure and characteristics

A changing industry?2003 2006

Number of firms 232 239

Years in BP 12.85 9.83

Firm size (% S/M/L) 66/17/17 84/8/8

Average # products 4.5 6.1

Firms w/ collaborations 84 80

Firms w/ patents 53 Cdn, 34 Foreign 66 Cdn, 72 US, 43 EU

BP R&D exp/BP employee $12,270 $20,464

Total BP revenues $3.1B $1.8B

BP revenue as % of total 46% 48%

BP revenue/BP employee $398,633 $442,443

Source: Statistics Canada, Bioproducts Development Survey, 2003 & 2006

Primary focus of enterprises

Source: Statistics Canada, Bioproducts Development Survey, 2003 & 2006

Regional location of enterprises

Source: Statistics Canada, Bioproducts Development Survey, 2003 & 2006

Raising capital

Source: Statistics Canada, Bioproducts Development Survey, 2003 & 2006

Raising capital, cont

Source: Statistics Canada, Bioproducts Development Survey, 2003 & 2006

Conceptual framework

• Portfolio of products/projects – add or trim?• Uncertain of benefits• Maximize CE of portfolio of products under

development or on the market– Choose level of hard and soft capital allocated to

the respective product/project – Subject to a resource constraint on (hard and soft)

capital– Non-negativity constraint on hard & soft capital

Conceptual framework, cont

• FOC equates net marginal benefits• Corner versus interior solution• Optimal level of hard & soft capital expressed

as a share of overall capital

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Conceptual framework, cont

• Resource based theory of the firm: sustained competitive advantage arises from heterogeneous resources and inimitatability

Methods & Data

• Share of (hard and soft) capital allocated to each product is a latent variable– Map to a count of the number of products

• Negative bionomial count data model of number of products under development or on the market– Variables capturing internal and external

resources to the firm (and how these might be deployed strategically), market environment

Methods & Data, cont

• 2003 & 2006 Bioproducts Development Survey• Internal: IP; firm size; age; BP R&D spending per

employee; early/late focus; BP share of revenue; benefits, barriers and strategies for development; private firm

• External: access capital; SR&ED; collaborations• Market: sub-sector of predominant focus; region

Benefits, barriers & strategies

2006 results Cronbach α Explained variation

Product/sales benefits 0.82 39%

Cost/environ benefits 0.70 21%

Technology commercialization barriers 0.81 35%

“Bio-product” specific barriers 0.77 21%

Accessing external knowledge & markets 0.77 37%

Developing internal knowledge & markets 0.72 12%

• Likert scale response items• 1=low importance, 5=high importance• Analyzed using PCA (with varimax rotation)

Benefits, barriers & strategies, cont

1=low importance, 5=high importance

Marginal effects – internal factors2003 2006

IP n.s. 2.37**

Small firm -2.03*** n.s.BP R&D exp/BP employee -0.002* 0.0001***

Late focus -2.70*** n.s.BP importance n.s. 4.12***

Product/sales benefits 0.52** n.s.Cost/env benefits n.s. 1.19***

Accessing external knowledge n.s. 0.68***

Developing internal knowledge n.s. -0.70*

Private firm n.s. 2.44***

Marginal effects – external factors

2003 2006SRED 1.37*** n.s.Total collaborations 0.25*** 0.12*

Target met n.s. -1.73**

Target not met n.s. n.s.

Marginal effects – market factors

2003 2006Biochem 1.70** 4.38**

Biofuel n.s. -2.04**

Biofibre n.s. -3.31***

Atlantic -0.91* n.s.SK/MB 1.88** 3.64*

Alberta 2.25** n.s.

Take home points

• From 2003 to 2006, more smaller firms with slightly higher count of products

• Impact of importance of benefits changed: product/sales versus cost/environmental

• IP, collaborations & BP R&D expenditure positively associated with count of products

• Large effects associated with sub-sector & some regional variables

Future work

• Need to be able to link databases to create panels– Link firms to measure performance in more

desirable way– Understand industry dynamics better

• Distribution of BP importance• Network effects• Non/semi-parametric analysis

THANK YOU

Any questions?

Factor analysis: benefits, barriers & strategies

Benefits Barriers Strategies1) Environmental/ cost benefits•Reduced energy consumption•Reduced production cost•Reduced envt’l damage•Community development

1) Bioproduct specific barriers

• Unreliable quantity & quality of biomass

• Higher transportation cost of biomass

• Higher price of biomass

1) Accessing external knowledge & markets

• Acquired/used knowledge from industry & public

• Used scientific databases• Entered foreign markets• Began new R&D project

2) Product/ sales benefits•Increased product range•Improved product value/performance•Developed new market/products•Increased sales/mkt share

2) Tech development barriers•Inadequate product certification•Restrictions on IP rights•Lack of financial capital•Regulation•Difficulty entering market•Lack of skilled personnel

2) Developing internal knowledge & resources•Developed firm policies for knowledge/ IP protection•Conducted IP audit•Developed/encouraged staff education/upgrading