1. Innovation and Finance in Canadian Food Manufacturing
Joseph Raymond and Getu Hailu
Department of Food, Agricultural, & Resource Economics, University of Guelph, Ontario
2nd Annual Ontario Food Manufacturing Sector Workshop, November 1, 2018
BACKGROUND
Productivity in Canadian food manufacturing lags behind other developed countries.
Lagging innovation is linked with the productivity gap. For every dollar invested per worker in the U.S., Canadian facilities only invest 62 cents. Canada only processes about 50% of its agricultural products . 1
Finance is a key decision variable when making innovation and investment decisions.
Different channels of finance can encourage more or less productive innovation
FINANCIAL VARIABLES
This study will examine whether the use of various sources of finance impact the probability of a firm introducing an innovation. This study will consider:
Debt finance
Non-residential mortgage
Business line of credit
Term loan
Lease finance
Trade credit finance
Equity finance
Government finance
Internal finance
Source: Luu (2016) . 2 A persistent gap exists between Canada and it’s global competitors in manufacturing
RELEVANCE FOR POLICY
This study will investigate whether different categories of innovation are linked to higher productivity levels. This can inform public policy by suggesting which types of innovation should be targeted by government grants and tax credits. This information will also be useful to see whether financial resources are flowing more towards more productive firms.
This study will also compare the performance (measured by productivity and profits) of firms that use government finance versus other channels of finance to see if government funding boosts .
The study will also consider firm characteristics such as size and age. These factors are important to consider, since attempts to boost innovation through financial channels may impact firms differently .
OBJECTIVES
Examine the link between different channels of finance and types of innovation.
Examine the relationship between types of innovation and firm productivity.
Assess whether different channels of finance lead to different productivity levels
Source: Statistics Canada. Lagging investment and innovation manifests itself in relatively low R&D levels
MEASURING INNOVATION
The study will use the 2014 Survey on Financing and Growth of Small and Medium Enterprises (SFGSME) which identifies four types of innovation:
Product
Process
Organizational
Marketing
In addition, the study also considers intellectual property as a measure for innovation.
We can also estimate innovation intensity using non-operating expenditures.
EXPECTED OUTCOME
The study is in the process of securing data from Statistics Canada. Final results are expected in April 2019.
George Morris Center “Improving Productivity in Canada’s Food Processing Sector Through Greater Scale.” Report, Institute for Competitiveness and Prosperity, February.
Luu, C “Strengthening competition in network sectors and the internal market in Canada.” OECD Economics Department Working Papers 1322.
REFERENCES
Source: Statistics Canada. As firms grow, their financial profiles. Policy directed at financing innovation should consider what kind of firms it will affect