1. IN SEARCH OF IMPACT AND OUTCOME INDICATORS BASED ON VANCOUVER BIOTECH CLUSTER STUDIES Monica Salazar & Adam Holbrook CPROST-Simon Fraser University Vancouver, Canada

2. Outline of presentation Introduction: need for new indicators 1. Overview of Vancouver biotech cluster, compared to Montreal and Toronto 2. Role of universities: inputs (public R&D funding) and outputs (patents, scientific publications) 3. Outcomes of R&D funding: commercialization of research, venture capital financing, employment 4. Conclusions

3. Statistical issues Definition: biotechnology vs life sciences  Human health biotech: our focus SMEs vs multinational pharmaceutical companies  SMEs mainly, usually called “SBF” Data at provincial or city level  Clusters in Canada are limited to a single city or metropolitan area: need of data at city level 2001 is the reference year (as much as possible) Normalization: population, HQP, innovative firms

4. 1. Comparison of Canadian biotech clusters (Stat Canada Biotech Survey 2001) ClusterBiotech Innovative Firms Biotech Revenues $M Biotech BERD $M # of Biotech Employees # of Bio- Scientists Montréal801017113293570 Toronto55109485266147 Vancouver48N/A*258170180 Subtotal18321104567297197 Canada3753569133711897430

5. Vancouver: distinct characteristics Firms recognize the cluster: 59% Networking patterns and interaction between various actors:  No vertical integration  Neither horizontal integration nor competition among firms Each firm works in specific niche of technologies or products, knowledge coming from local researchers Little local manufacturing, IP producer No competition for local talent Competition for venture capital financing

6. Role of location and lifestyle are contributing factors, for instance: Why located in Vancouver: 85% founders from the city, with local connections (labs), (and city is nice) Advantages of the city: cluster existence and facilities -R&D labs, VCC, CROs- associated with it (and city is nice) Factors contributing to growth of the cluster and the firms (most important first):  research institutions,  supply of workers with particular skills,  co-location with other firms in the same industry,  educational and training institutions. Location, location, location

7. 2. Role of research institutions: Inputs and Outputs Biotech industry: research dependent, though universities and public R&D funding are essential. Universities are a necessary but not sufficient condition for cluster emergence. Regions must offer fertile climate and soil to allow seeds from universities to flourish.

8. R&D funding for biotech 2001 (CIHR and NSERC biology)

9. Tests to qualify impact of R&D funding in cluster creation and development (Clayman & Holbrook, 2003) R&D intensity: R&D expenditures normalized by HQP  “Productivity” indicator in terms of IP (allocation mechanisms) HQP intensity: HQP normalized by labour force R&D intensity and HQP intensity  Measure of receptor capacity

10. Year-to-Year Changes in NSERC R&D Intensity for 15 Major Cities

11. Year-to-Year Changes in CIHR R&D Intensity for 15 Major Cities

12. Patenting activity Output measure of R&D activity Relationships through patents between companies and researchers, involvement in creation of start- ups (economic relations) Patents as a knowledge spillover measure Number of patents and patent citation real factors of employment growth in biotech companies (Queenton & Niosi)

13. Bio-scientists U.S. Patents by Canadian cities in 2002 (Queenton, 2004)

14. Scientific publications Publications more or less follows the R&D funding pattern, although … Vancouver bio-scientists publish less per millions of dollars invested (public R&D funding). Why? One possible answer is the closer relationships these researchers have with local firms.

15. Scientific publications ClusterNumber publications 2000 R&D funding for biotech 2001 $M Publications per $M invested Montréal29168.0 4.3 Toronto27952.2 5.4 Vancouver16549.0 3.4 Subtotal735169.24.3 Canada *1291391.6 4.9

16. Measures of biotechnology activity in metropolitan centres (VEDC, 2002) Biomedical research capacity and activity Lower Mainland / Southern Vancouver Island 52 – centre average (US cities) CIHR/CFI funding 2000 US$34.5 millionsUS$225.5 millions Patents files at US Patent Office 1990-1999 354676 Research Index0.341.0

17. Measures …cont. Biotechnology Commercialization Lower Mainland / Southern Vancouver Island 52 – centre average (US cities) Venture capital 1998- 2001 US$204.1 millionsUS$191.3 millions Value of R&D alliances US$290.0 millionsUS$203.0 millions Biotechnology firms with 100 or more employees 66 New biotechnology firms 1991-2001 609 Commercialization Index 2.501.0

18. 3. Outcomes of R&D funding Commercialization of research: hot topic  Licensing (patents)  University spin-offs: no official collection of statistics Venture capital raised Human resources: HQP, employment creation/growth, attraction and retention of talent

19. Biotech spin-off companies 1995-2001 (Holbrook & Clayman, 2003) ClustersActiveInactiveTotalSurvival Rate Active per 100,000 HQP Montréal31134667.46.0 Toronto2393271.92.7 Vancouver1972673.15.6

20. Venture capital financing $M (MacDonald & Assoc.) Cluster20022003 Venture capital per innovative firm Montreal167.7152.92.1 Toronto100.674.51.8 Vancouver71.943.11.5 Subtotal340.2270.51.9 Canada479.0392.01.3

21. $- $100 000 $200 000 $300 000 $400 000 $500 000 $600 000 Funding ($1000s) Montreal Toronto Vancouver Ottawa Quebec Winnipeg Calgary Kingston Edmonton London Halifax Saskatoon City Venture Capital and CIHR Funding Per City 2000-01 to 2003-04 ( NRC & SECOR, 2004) Venture CapitalCIHR Funding

22. Human resources, talent & employment Input (HR, HQP) and outcome (employment) New economic geography of talent Relations between talent and quality of life of places (R. Florida)  What is the impact in cluster emergence and development? (firms follow people)  Industrial agglomeration: economic, social & cultural factors Vancouver is attracting people: 70% top management have Ph.D. degrees from non-local universities (new data being collected) Bio-scientists play a major role in the location and growth of firms Vancouver firms have a different employment structure

23. Human resources data (Stats Canada) ClusterPop. Millions Employ- ment Millions HQP Millions # Biotech Employees Share of Biotech Employ- ment Avg. emplo- yees innova- tive firms Montréal3.501.68.512,93524.736.7 Toronto4.882.41.872,66122.448.4 Vancouver2.081.00.341,70114.335.4 Subtotal10.465.091.717,29761.439.9 Canada31.0217.053.6811,897100.0031.7

24. Distribution of biotech employees in innovative firms (NRC & SECOR, 2004) Montrea%Toronto%Vancouver%Tot % Sci. research/ direction 50935.335427.741641.434.4 Technicians40027.727421.526126.025.1 Reg. Clinical Affairs 523.61098.5282.85.1 Production15410.7514.0606.07.1 Finance/Mrktg.1258.733626.3545.413.8 Mgmt.18913.113510.612011.9 Other130.9171.3666.62.6 Total Major Clusters 144210012761001005100

25. Conclusions Identified factors and conditions that contribute to the emergence and success of regional clusters [Vancouver]:  Strong university research-oriented [UBC],  Funded by public granting agencies [not as important],  An entrepreneurial spirit [crucial],  Availability of venture capital [critical],  A favourable location and environment, so that talented people is attracted to these places [sticky labour market]. Research capacity is a necessary but not a sufficient condition.

26. What do the indicators tell us? Is Vancouver significantly different in structure, not just size, from Toronto and Montréal? Is Vancouver biotech industry an emergent or a research-based cluster? Vancouver is a R&D-based cluster: local firms invest more on R&D, large pool of bio-scientists, who are highly productive (patents), firms employ more scientists and technicians, and there is little manufacturing. Why do Vancouver perform well in outcomes, but not very good in inputs and outputs? Are we measuring the right issues? Need for new indicators.

27. Is Vancouver a viable cluster? The model of being an IP producer cluster seems to work. It seems that we do not need a manufacturing facility or pharma company to further develop the cluster. If the largest local company were to relocate or disappear it is unlikely that the cluster would be jeopardized. New ideas, new firms, new people will come. Policy advice: environment is key; more R&D money would be good. Need of longer-term studies.