1. Exploring Cross-sectoral Transfer of Regional Innovative Capacity: from agriculture biotechnology to health care Jeremy Karwandy Interdisciplinary M.Sc. Candidate “Innovation and Firm Strategy”

2. Can a developing innovative health sector leverage the innovation success of an existing Agricultural biotechnology sector? Saskatoon’s agricultural biotechnology cluster –international reputation for its work on the development of new crop varieties –Recently capitalized on federal investment in genomic science … several projects on animal and plant science are ongoing Health Care Innovation – A growing and aging global population drives the demand for innovative solutions in the health care sector. –A self-defining, local health innovation system could not be identified by participants in a recent study by Karwandy and Ryan (2003)

3. Project Framework – assessing regional competencies Regional Competencies (competitive advantage) –The Resource Based View of the firm has been extended to the regional level (Foss, 1999; Mathews, 2003) Provides the concepts needed to identify and categorize competitive advantage and its sources. Lawson (1997) suggests communal competencies “supersede firm-level competencies in scope and persistence (Tallman, 2004: 10)

4. Basic Principles Firms are distinct bundles of resources and capabilities –Resources: finite assets tangible or intangible i.e. technologies, capital goods (FOPs), know-how, patents and IPRs –Capabilities: ability to utilize resources more than just procedures, they enable ‘economic learning’ i.e. bring products to market faster, efficient implementation of org. change, effective researcher.

5. Basic Principles Two types of competitive advantage –Resources + Capabilities = Competitive Advantage –Traded interdependencies (Economic) Exist in the economic sphere i.e. licensing, alliances, or acquisitions in which formal exchanges occur –UnTraded interdependencies (Social) “based on shared knowledge for which no market mechanism exists” (Storper 1993, 1995, 1997 as cited in Tallman, 2004: 8) i.e. conventions, rules, practices, and institutions –Implication: Two Parallel systems; untraded interdependencies reduce the transaction costs of exchanges related to traded interdependencies

6. General Observations Distinction between short term and long term –RBV literature frames this argument as disequilibrium strategies (rent seeking or use of isolating mechanism) VS capability development (path dependent, long term process) –Håkansson (1993: 217) “we are looking for a collective business structure where stability and variety can be combined” (Foss, 1999: 7)

7. General Observations Health Care: Resources –Professional + Managerial Labour Hugely deficient … “ the region has an overabundance of accountants and lawyers but not enough management-based professionals” that would be necessary for innovation-based initiatives in healthcare and IT (Karwandy and Ryan, 2003: 32). –Technical Labour Is a plentiful resource but the communities ability to access and retain was questioned –Financing Insufficient and unsophisticated … a cultural impediment was described as “a resistance to excel and to create wealth” (Karwandy and Ryan, 2003: 33)

8. General Observations Health Care: Capabilities –Central actors to the innovation process TRLabs – unique Industry-Government- University model for collaborative R+D and commercialization Saskatoon Health Region – Business Development Office – a for-profit, arms length office well positioned to identify and define health sector market opportunities QCC communications (private IT firm), Provincial government (financing and innovation agenda), NRC-IRAP (support of entrepreneurial efforts)

9. General Observations Ag Biotech: Resources –Labour – generally a thick labour market exists with some deficiency in management labour –Finance – adequate sources for early stage public financing but limited amounts of private venture capital –Raw Materials – valuable local infrastructure (labs, greenhouses, field trials, etc) and significant knowledge production (IP, publications and citations)

10. General Observations Ag Biotech: Capabilities –Centrality and Density measures identify 8 core actors (see Procyshyn forthcoming) Agriculture and Agrifood Canada (AAFC), Ag West, Canadian Light Source (CLSI), NRC – Plant Biotechnology Institute (PBI), NRC – Industrial Research Assistance Program (IRAP), POS pilot plant, Saskatchewan Research Council (SRC), and University of Saskatchewan (U of S). –Public institutions exert the most influence over the ‘social fabric’ of the cluster (untraded interdependencies) –Strength: the creation and dissemination of knowledge –Shortfall: translation of research findings into commercial products

11. Discussion Traded Interdependencies are less transferable across sectors –Based on industry specific resources and routines (labour, specialized inputs like knowledge, etc) Distinction is needed between upstream and downstream activities –Saskatoon cluster is focused on upstream activities (R+D) –Upstream UnTraded interdependencies likely differ from downstream UnTraded interdependencies Health sector development requires access to capabilities external to the firm … joint effort is needed to overcome the current lack in competencies.

12. Thank You ! Jeremy Karwandy University of Saskatchewan jeremy.karwandy@usask.ca