Supporting Canada’s Innovative SMEs Daegu Initiative First-Cycle Assessment Workshop June 7, 2010 Hong Kong, China Anne Pigeon Senior Policy Advisor Small Business & Tourism Branch

1 Gross R&D expenditure (GERD) as a percentage of GDP, selected OECD countries, 2000 and 2006 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, Canada’s Position in R&D

2 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

3 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 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

4 Source: SME Financing Data Initiative, Statistics Canada, Survey on Financing of Small and Medium Enterprises, 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 Profile of Innovative SMEs (2004)

5 Overview of Canada’s Assessment Area A: Linkages A4 - 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

6 Overview of Canada’s Assessment Area B: Access to Specialists B4 – 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

7 Overview of Canada’s Assessment Area C: Access to Capital C1 – 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

8 Overview of Canada’s Assessment Area D: Networks and Clusters D1 – National Research Council has established a network of 11 clusters across Canada Area G: Measuring Progress G4 – Statistics Canada measures the innovation performance of manufacturers and measures R&D expenditures by firm size

The Business Model CLIENT Technical, engineering and business advice Networking International partnership/readiness Technical and economic studies ($$) Graduates ($) Projects ($$$) Strategic information 9 Innovation strategy 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 Crelinsten Ottawa Citizen, March 23, Bluedrop Performance Learning, St. John’s NFLD

11 Who are IRAP’s clients? NRC-IRAP worked with 8,053 small and medium-sized enterprises (SMEs)* in , of which 1,604 received funding. *Firms with up to 500 employees 78% had less than 50 employees 60% have fewer than 20 employees NRC-IRAP’s Number of Clients by Province for FY Province # of Clients

12 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 $ M Expenditures by Industry Sector in FY ($86.9M) 3.1 Agrifood ICT/Commun Computer/Electronics Electrical Info/Software Life Sciences S&T - Eng Resources Enviro/Waste Manufacturing Other

13 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, ONMedicago, Québec, QC

What sort of financial support does IRAP give? Pharmatrust, Toronto, ON 14 Financial contributions to firms to develop technologies Financial contributions to organizations providing services to SMEs Financial assistance to hire new graduates (YEP)

15 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? 16

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 17

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 18 Kinek Technologies, Saint John, NB

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