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Supporting Canada’s Innovative SMEs
Daegu Initiative First-Cycle Assessment WorkshopJune 7, 2010Hong Kong, China
Anne PigeonSenior Policy AdvisorSmall Business & Tourism Branch
2
0.00
0.50
1.00
1.50
2.00
2.50
3.00
J apan Sweden Finland Germany UnitedStates
TotalOECD
Australia Italy France Canada UK
%
2006 2000
Gross R&D expenditure (GERD) as a percentage of GDP, selected OECD countries, 2000 and 2006
0.00
0.50
1.00
1.50
2.00
2.50
3.00
Sweden J apan Finland UnitedStates
Germany TotalOECD
France Australia UnitedKingdom
Canada Italy
2006 2000
BERD as a percentage of GDP, selected OECD countries, 2000 and 2006
Overall Investment in R&D in Canada is low relative to the other comparison countries
Canadian business sector has a low propensity to innovate relative to other comparison countries.
Canada is the leader in public expenditures in R&D.
Source: OECD, Main Science and Technology Indicators, 2008-2
Canada’s Position in R&D
3
21.3
2.0
0.271.1
0
5
10
15
20
25
Small (0-99) Medium (100-499) Large (500+)
$ M
illi
on
s
Expenditures on R&D
Industry AverageExpenditures on R&D
• Of total R&D spending in 2003, 23 percent came from 10,734 small firms (87 % of all reporting R&D firms), with an average of $0.27 million per firm.
• 60 percent from 371 large firms with an average of $21.3 million per firm.
Small firms on average spend less on R&D than large firms…Average Expenditures on R&D by Firm Size, 2003
Resesarch & Development
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2.8
4.8
5.9
2.1
0
1
2
3
4
5
6
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Small (0-99) Medium (100-499) Large (500+)
Per
cen
t
R&D Expenditures as a %of Revenue
Industry Average R&DExpenditures as a % ofRevenue
• Small business that conducted R&D spent 5.9 percent of their revenues on R&D• Large businesses spent 2.8 percent of their revenues on R&D • The overall average for all businesses was 2.1 percent. • Innovative SMEs generated twice as much revenue and profits than non- innovative firms from 2004 to 2007.
Resesarch & Development…but have a higher R&D intensity than large firms
R&D Expenditures as a Percent of Company Revenues, by Firm Size, 2003
5
Source: SME Financing Data Initiative, Statistics Canada, Survey on Financing of Small and Medium Enterprises, 2004.
•R&D intensive SMEs are those who invest 20% or more of their total expenditure in R&D•Between 4% and 5% of Canadian SMEs were R&D intensive in 2004.
Profile of Innovative SMEs (2004)
Innovative SMEs Characteristics Non-Innovative SMEs
51.9 % under 40 years Age of majority owner 53.3 % under 40 years
54.9 % more than 10 years Managerial experience of
majority owner 69.9 % more than 10 years
1–2 years old: 22.9 % started during 2002–2004 3–6 years old: 25.1 % started during 1999–2001 7 years+: 52.0 % started prior to 1999
Year firm starting selling goods and services
1–2 years old: 10.7 % started during 2002–2004 3–6 years old: 18.8 % started during 1999–2001 7 years+: 70.5 % started prior to 1999
21.4 % exporters 41.2 % of revenues generated from exports
Export activity
7.7 % exporters 31.9 % of revenues generated from exports
72.7 % intended to expand business
Growth intention 37.6 % intended to expand business
6
Overview of Canada’s Assessment
Area A: LinkagesA4 - Canadian Intellectual Property Office (CIPO) offers reduced fees to “small entities” (fewer than 50 employees)
A8 – Canadian Youth Business Foundation provides loans and mentoring services to young entrepreneurs
A9 – Industrial Research and Development Internship (IRDI) program places graduate students and post-doctoral fellows in businesses to undertake research
A9 – Industrial Research Assistance Program (IRAP) provides funding to innovative SMEs to hire science and engineering students
7
Overview of Canada’s Assessment
Area B: Access to SpecialistsB4 – Small Business Internship Program (SBIP) provides a wage subsidy to small businesses to hire a post-secondary student to implement IT or e-commerce projects
B7 – Business Development Bank of Canada (BDC) offers consulting services to its clients
B10 – IRAP provides advisory services and technical services to SMEs through its Industry Technology Advisors
8
Overview of Canada’s Assessment
Area C: Access to CapitalC1 – IRAP provides funding for R&D projects to help SMEs develop technologies
C6 – Business Development Bank of Canada (BDC) is a government-owned bank whose mandate is to support Canadian SMEs
C8 – Canadian Small Business Financing Program (CSBFP) is a loan-loss guarantee program which helps small businesses access loans of up to CAD$500,000
9
Overview of Canada’s Assessment
Area D: Networks and ClustersD1 – National Research Council has established a network of 11 clusters across Canada
Area G: Measuring ProgressG4 – Statistics Canada measures the innovation performance of manufacturers and measures R&D expenditures by firm size
The Business Model
CLIENT
CLIENT
Technical, engineering and business advice
Networking
International partnership/readiness
Technical and economic studies ($$)
Graduates ($)
Projects ($$$)
Strategic information
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Innovation stra
tegy
Innovation stra
tegy
Competitive Technology Intelligence
Diagnostics ($)
Intellectual Property Management
Strategic planning, Market assessment
SME Innovation
• SMEs are most successful when focused on their marketplace and client
Many people equate innovation with R&D. Their notion is that new ideas from research lead to new products and services. This belief is erroneous.
Innovation occurs by identifying needs and finding a way to meet them.
H. Douglas Barber and Jeffrey CrelinstenOttawa Citizen, March 23, 2010
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Bluedrop Performance Learning, St. John’s NFLD
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Who are IRAP’s clients?
NRC-IRAP worked with 8,053 small and medium-sized enterprises (SMEs)* in 2008-2009, of which 1,604 received funding.
*Firms with up to 500 employees*Firms with up to 500 employees
• 78% had less than 50 employees
• 60% have fewer than 20 employees
0
500
1000
1500
2000
2500
3000
ON QC BC AB MB NB NL SK NS PE
NRC-IRAP’s Number of Clients by Provincefor FY 2008-2009
Province
# o
f C
lien
ts116175158216293278
836
1045
2312
2526
13
What are the clients’ challenges?
• Difficulty sourcing (investment) capital
• Management capacity challenges
• Limited national and international networks
• Do not have enough R&D resources and technical expertise
0
2
4
6
8
10
12
14
16
18
$ M
12.0
16.3
1.42.8
9.810.1
8.3
2.6
15.4
5.2
Expenditures by Industry Sector in FY 2008-2009 ($86.9M)
3.1
Agrifo
od
ICT/C
omm
un
Compu
ter/E
lectro
nics
Electri
cal
Info
/Sof
twar
e
Life
Scienc
es
S&T - Eng
Resou
rces
Enviro
/Was
te
Man
ufac
turin
gOth
er
14
What does IRAP provide?
• Customized technical and business advisory services
• Strategic and scientific information
• Linkages to other organizations, potential partners, investors
• Financial support
BTI Photonics, Ottawa, ONBTI Photonics, Ottawa, ON Medicago, Québec, QCMedicago, Québec, QC
What sort of financial supportdoes IRAP give?
Pharmatrust, Toronto, ONPharmatrust, Toronto, ON
15
• Financial contributions to firms to develop technologies
• Financial contributions to organizations providing services to SMEs
• Financial assistance to hire new graduates (YEP)
16
IRAP Field Staff
Experience• 240 ITAs
• All have extensive R&D and management experience in industry
• 75% have Masters or PhD
• 45% have run their own R&D facility
• 34% have been entrepreneurs
Outreach• Field staff are located
in 147 offices in 100 communities
• Each work with 42 clients per year
• 11 of their clients will receive funding from NRC-IRAP
• Typically make 105 client site visits a year
Services• R&D project advice• Competitive
Technical Intelligence• Networking and linkages• Funding opportunities &
programs
LEGEND
NRC-IRAP Industrial Technology Advisor (ITA)
NRC-IRAP Regional Office
NRC Institute
NRC Cluster
Where does IRAP support clients?
17
How NRC-IRAP works with organizations, universities, colleges and
cegeps
• NRC-IRAP staff co-located at organizations, universities and colleges
• Expert services and information
• Enhance linkages across provinces and countries
• Participate in sectors, clusters and national programs
18
How do we get to work together better?
• Field staff to know each other locally and in their sector of interest
• Ensure that local staff knows about what each other can do for the SMEs
• Become a part of each other’s tool kit
• Personal relationship is the key
19
Kinek Technologies, Saint John, NB