PROMOTING INNOVATION &
COMMERCIALIZATION IN RURAL BC
FINAL REPORT
MARCH 2003
Ference Weicker & Company
Management Consultants
Ference
Weicker
&
Company
EXECUTIVE SUMMARY
INTRODUCTION & OVERVIEW
It is widely recognized within the Government of Canada and the Government of BC that innovation has
become the major driving force in economic growth and social development. The Government of Canada
explicitly recognizes the importance of innovation in its new Innovation Strategy, which notes that knowledge is
now the main source of competitive advantage. Further, the Government B with input from public sector
partners, community economic development organizations, regional science councils and industry B has
acknowledged the importance of innovation in rural BC, its links to science & technology
development/application and the essential role it plays in the economic health and success of the province. In
order to succeed, all parties recognize a need to know the current status of science & technology applications
province-wide, what strengths and weaknesses exist in the regions and where future support should be
directed to most effectively enhance innovative applications in rural BC.
The results of this partnered input manifest themselves in this study B APromoting Innovation &
Commercialization in Rural BC@ (PIC). It provides the empirical evidence, input and ground-level guidance
regarding what actions and resources are required in rural BC to enhance a culture of science & technology
application in all regions. Through this study B and the resulting actions to be taken B a more diversified,
sustainable community economic infrastructure will grow. Rural British Columbia has unique strengths, skill
sets, resources and geography that can be directed towards economic advantage in the global marketplace.
This study functions both as a Asnapshot@ of rural BC=s current state and as a Aroadmap@ towards improved
regional science & technology resources, applications and competitiveness. As outlined in the following pages
B and detailed in the attached report B eight strategic recommendations have been identified as priorities to
improve innovation and science & technology commercialization in rural BC.
Strategic Recommendations:
1.
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Strengthen the capabilities of communities and regions in planning, developing, and
implementing strategies and actions to improve innovation performance, including enhanced
support for rural agencies such as regional innovation councils, Community Futures
Development Corporations, technology centers and related resources;
Enhance the research infrastructure serving the regions, through institutions such as the
University of Northern BC and the University Colleges in rural BC;
Develop and retain a highly skilled work force to support innovation, with significant
efforts aimed towards the North and First Nations communities;
Increase access to financing, particularly at the early stages of business development by
the creative application of venture capital and debt financing options such as the provincial
government=s Equity Capital Program and Western Diversifications=s loan loss reserve
initiative;
Assist in the development of and access to markets for regional innovation companies
through the development of needed skills sets (i.e. eBusiness and exporting) and linkage to
relevant contacts and resources;
Foster an innovation culture through awareness, awards programs such as AScientists in
Schools@ and recruitment strategies involving the key stakeholders (i.e. industry, labour,
education/research institutions and government);
Improve the business environment for innovation through sharing Abest practices@ related
to management, high tech business start-up support and entrepreneurial training; and
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Promote the development of new rural clusters where promise is shown and act as a
catalyst to the enhancement of existing clusters such as wood products, energy and
information technology in all regions.
With the input provided to this initiative by all parties B public sector, private sector, academia and rural
industry B a Plan of Action can be developed towards a more innovative, competitive rural BC where science
& technology commercialization and application plays a key role in every region.
THE IMPORTANCE OF PROMOTING REGIONAL INNOVATION
The Government of Canada=s Innovation Strategy provides leadership and will help to chart the future
directions of the innovation support system, which consists of research institutes and organizations, sources of
funding for R&D, technology transfer organizations and facilitators, education and training organizations,
sources of business capital, and other sources of assistance.
To date, the members of the innovation support system in Canada have tended to focus their efforts and
programs on the major population centres. However, the Innovation Strategy stresses that AInnovation should
not be viewed as exclusively based in large urban centres@. In fact, encouraging innovation in the regional
areas can be a critical driver of economic growth across Canada.
The potential benefits of improving rural innovation performance are particularly significant in British Columbia,
given that:
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The regions located outside of Greater Vancouver and Victoria are the primary
economic engine of the Province of British Columbia. Home to about 41% of the
province=s population, the regions account for over 50% of manufacturing shipments and
produce a much higher per capita income from exports than do the urban areas.
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There are tremendous opportunities in the regions to expand economic activity in a
wide range of existing and emerging economic clusters. The extent to which we are able
to realize these opportunities will, in large part, be determined by our ability to improve
productivity, add value and differentiate our products and services through innovation.
PURPOSE AND METHOD OF STUDY
Prior to this study, there was relatively little information available about the characteristics of regional
innovation in British Columbia. The objectives of this study, therefore, were to review innovation activity
occurring in the regions, assess the infrastructure and systems that have been established to support regional
innovation, and identify potential actions that could be taken to improve innovation performance.
Given these objectives, it was important to obtain input from a broad cross-section of representatives from
government, industry, academia and other stakeholders in the regional innovation support system. Towards
this end, an extensive research and consultation program was implemented which included:
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A detailed literature review and Internet search that enabled the field research to build on
the existing work that has been undertaken.
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Detailed interviews with 263 regional businesses that have been identified as utilizing or in
need of technological information for the purposes of technology transfer, technology
application, product development or product commercialization.
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Detailed interviews with 50 representatives of organizations that comprise the science and
technology (S&T) infrastructure in rural BC.
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Detailed interviews with 50 representatives involved in community economic
development (CED) in rural BC not normally considered S&T agencies such as Community
Futures Development Corporations, economic development offices, Chambers of
Commerce, First Nation's organizations, and the Business Development Bank.
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Focus groups in 10 regional centres with 86 individuals including industry representatives,
local representatives of the S&T support system, representatives who may play a role in
implementing strategies to address key issues, and others who offered outside objective
opinions.
The study also benefited from the direction of an active Advisory Committee that included representatives
from Federal, Provincial and Local Governments, academia, research institutions, and industry.
THE IMPORTANCE OF PROMOTING CLUSTER DEVELOPMENT IN RURAL BC
The underlying objective for improving innovation performance is to facilitate the further development of
industrial clusters involving the regions. The ability to innovate and to commercialize new products, services,
and processes across many sectors has been important and will become even more critical to the future
economic prosperity of the regions. As an illustration, the agriculture industry in rural BC has been able to
remain competitive, while the real price of agricultural products has dropped, only because of the development
and implementation of new technologies. As one report noted, "Agriculture today is as much on the cutting
edge of technology as engineering or computer science."
Improving innovation performance will benefit a range of existing and emerging clusters which are resident in
rural BC. Examples of clusters, which are already significant contributors to the economy of regional British
Columbia, that will benefit from a strengthened innovation support system include:
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The wood products cluster, which is concentrated in central and northern BC;
The food and beverage cluster, including the wine industry, which is concentrated in the
Okanagan;
The energy and mining cluster, which is based largely in the northeast;
The transportation and logistics cluster, which is concentrated in the central interior; and
The information technology cluster which has a strong presence in the southern interior and
on Vancouver Island.
With these existing clusters in mind, proper support can act as a catalyst to immediate, positive economic
benefits.
There are also a variety of emerging clusters in the regions of BC, which represent significant opportunities for
further growth and development. Examples of emerging clusters include:
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Value-added wood manufacturing in the Fraser Valley and central and northern BC;
Agriculture biotechnology/life sciences in the Okanagan;
The aquaculture cluster located along the coast and on Vancouver Island;
Alternative sources of energy, driven in part by the impacts of the Kyoto Accord;
Off-shore oil and gas exploration, which is dependent on the moratorium being lifted;
Film and video production in a number of regions, including Vancouver Island and northern
BC;
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Advanced manufacturing and advanced materials in the southern Interior;
Oceans technology including remote sensing and GIS on Vancouver Island and the north
coast as well as environmental management; and
The new media component of the IT cluster.
With these emerging sectors in mind, directed support can lead to long term benefits through the development
of viable clusters province-wide.
AN OVERVIEW OF THE REGIONAL INNOVATION SYSTEM
The major findings of our review of the regional innovation system are as follows:
1.
The basic foundation of a rural innovation system has been established in BC.
Key elements of the regional innovation support system include research institutes and organizations,
sources of funding for R&D, technology transfer organizations and facilitators, education and training
organizations, sources of business capital, and other sources of business assistance as outlined
below.
OVERVIEW OF THE INNOVATION SYSTEM
IN REGIONAL BRITISH COLUMBIA
Component
Summary
Research Institutes and
Organizations
There are 15 S&T related research facilities located in the regions, the
largest of which are the Pacific Biological Research Station and the
Summerland Research Station.
Sources of Funding for
R&D
IRAP is the only significant source of funding that has a permanent physical
presence in the regions. Other leading sources of funding include NSERC,
CFI, Revenue Canada SRED, Provincial SRED and ASI. About 2% of BC
NSERC and CFI funding has been awarded to the regions as compared to
about 18% of IRAP funding and 19% of ASI funding. Approximately 1,400
companies in BC claim SRED annually, of which 10% to 15% are believed to
be based in the regions.
Technology Transfer
Organizations and
Facilitators
These organizations, which can assist in the development, transfer, adoption
and/or application of new technologies, include 7 regional technology
councils, 4 technology access centres, a university industry liaison office,
and the network of Industrial Technology Advisors which includes 8 who are
based in the regions. The seven councils and four technology access
centres have come together to form the BC Regional Science & Technology
Network (BCRSTN)
Education and Training
In rural BC, there are 4 university-colleges, 6 colleges, 1 institute, and 1
university. In 2000/01, the University of Northern BC awarded 254 degrees
related to science and technology (about 5% of the provincial total). In
addition, there are over 4,500 full-time equivalent students enrolled in
science and technology related programs at the regional colleges and
university-colleges (about 35% of the provincial total).
Sources of Business
Capital
The 34 CFDCs made loans into rural BC totalling almost $140 million over
the past five years. Other leading sources of funding have included BDC
(which has 9 regional offices), WD Loan Investment Fund Programs,
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Component
Summary
chartered banks and credit unions.
Other Support for
Commercialization
2.
Examples of organizations which provide information, advice, and other
forms of support to assist in the commercialization of new products,
processes and technologies include the 34 CFDCs, 38 economic
development commissions, the Canada-BC Business Services Society
(which has established 75 Community Partnerships), business incubators in
a variety of communities, and the members of WestLink.
Innovation is occurring in the regions but at levels lower than in the major urban centres.
Regional industry is actively involved in developing products, technologies and/or production
processes. Of the companies surveyed, 63% developed new or significantly new products, processes
or technologies and 55% reported R&D expenditures over the past three years. Most of the
companies indicated that those innovations have been extremely important to the success of their
business. However, the survey results also indicate that most innovation activity in the regions is not
based on major scientific breakthroughs but rather is focussed on small, incremental improvements to
existing products, processes and technologies or the adoption of technologies and processes
developed elsewhere.
3.
There are challenges to building on the initial foundation to establish an innovation system
that will enable the existing and emerging regional clusters to realize their potential for
development.
The report identifies a wide range of gaps and areas where the regional innovation system needs to
be strengthened. The most visible gaps and opportunities for improvement include:
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Too little research is being conducted by institutions based in the regions and
not enough of that research reflects regional priorities. There is a strong
correlation between innovation performance and the research infrastructure. Only 15
of the 103 S&T related research facilities in BC are located in the regions and most
have very limited research budgets. Only about 2% of BC NSERC and CFI funding
has been awarded to the regions.
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The regions are not producing enough graduates from S&T diploma programs.
Although enrollment in regionally-based S&T related degree programs is increasing,
95% of the university S&T graduates and 65% of the college S&T students are still
educated in the Lower Mainland and Victoria. Where students are educated has a
profound impact on where they eventually choose to work. For example, a recent
survey found that 73% of UNBC graduates from 1996 stayed in northern BC
and another 5% were living in the southern interior. In contrast, a 2001 University
Presidents= Council of British Columbia survey of recent graduates from all BC
universities found that, of the 88% of grads who remained in BC, only 5% were living
in northern BC and 7% were living in the southern interior as compared to 61% and
15% who were living in the Lower Mainland or on Vancouver Island respectively.
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Gaps remain in the telecommunications infrastructure. The Internet has the
potential to greatly increase the accessibility of regional businesses to programs,
services, and expertise. However, access to high-speed Internet services varies
significantly across the province.
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Stronger linkages need to be developed between the various components of
the innovation support system at both the community and regional level. A
variety of actions will be required to strengthen community capacity and improve the
level of coordination am amongst various elements of the system.
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Access to patient capital is much more limited in the regions. For example, only
3 of the 263 companies surveyed reported receiving a new venture capital
investment in the past three years. The primary sources of equity capital have been
investments by shareholders/owners and by other private investors (including love
money). A major constraint is that many of the companies are simply not sufficiently
investor ready to attract investment capital.
In taking steps to strengthen the innovation support system, it is important to recognize that
characteristics of regional businesses provide additional challenges to those typically faced
by businesses in the major urban areas.
Regional business tend to be:
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Smaller in size. Competing demands for staff time is a major constraint to
innovation.
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Geographically dispersed, which increases the difficulty of physically accessing
resources both within and external to the region. Geographic proximity is an
important factor relating to the speed of adoption of new technologies in that the
farther a region is away from the source, the longer the transfer period.
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Less aware of the resources that are available;
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Less developed in terms of their technical capabilities and less experienced in the
development of new products, processes and technologies. In particular, companies
in traditional industries, which typify the regional economies, are less likely to have
established cultures, climates and systems that support innovation; and
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More limited in terms of their access to, and use of, the Internet.
These additional challenges impact on the ability of regional companies to develop strategic
relationships with universities, colleges, research institutions, and programs (particularly those based
outside the region) and to access technical expertise, resources and equipment. One implication of
this is that 85% of the R&D undertaken by regional companies is conducted in-house. Only 17% of
companies currently identify universities or colleges as an important source of information in the
development of their products, technologies or processes and only 3% report entering into R&D
contracts with a university or college.
The limited opportunities for interaction between members of the R&D infrastructure and regional
businesses is also a contributing factor as to why the focus of institutional research may not be
consistent with regional needs and priorities. Research undertaken internationally is often more
relevant to local businesses than research undertaken within the province.
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STRATEGIC DIRECTIONS AND RECOMMENDATIONS
The study found strong support for placing a high priority on improving regional innovation performance as a
means to promote further development of these clusters. As an illustration, 94% of the CED and S&T
representatives surveyed indicated that there are significant opportunities to use science, technology and
innovation to promote regional economic development in BC. It is widely recognized that improving regional
innovation performance is the key to reinvigorating traditional economic clusters and supporting further
development of emerging economic clusters. Improved innovation performance will enable regional
communities to transform from resource-based economies to more knowledge-based economies, which will
benefit the entire province. For this to occur, the Government of Canada, the Government of BC, and other
members of the innovation support system will need to focus greater attention on enhancing innovation
performance in the regions.
Given that a variety of factors are working to constrain innovation activities in the regions, a range of actions
will be required to address these constraints and numerous organizations will need to be involved in their
implementation. The report details eight major strategic recommendations for improving the environment for
innovation. In each strategic recommendation, a series of specific target outcomes and actions have been
defined to provide a basis for prioritizing future activities and monitoring the progress made in improving
innovation performance in rural BC. The eight strategic recommendations and specific actions are listed
below.
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