Finland Tekes - Best Practices in Innovation Policies - 2005

177 05 Tekes • Best practices in innovation policies

Best practices in innovation policies Technology Review 177/2005

Technology Review

National Technology Agency Kyllikinportti 2 P.O. Box 69, FIN-00101 Helsinki, Finland Tel. +358 1060 55000, fax +358 9 694 9196 e-mail: [email protected] www.tekes.fi

September 2005

ISSN 1239-758X ISBN 952-457-204-4

Best practices in innovation policies Heikki Kotilainen

Technology Review 177/2005

Best Practices in Innovation Policies

Heikki Kotilainen

Technology Review 177/2005 Helsinki 2005

Tekes – Your contact for Finnish Technology Tekes, the National Technology Agency of Finland, is the main funding organisation for applied and industrial R&D in Finland. Funding is granted from the state budget. Tekes’ primary objective is to promote the competitiveness of Finnish industry and the service sector by technological means. Activities aim to diversify production structures, increase production and exports and create a foundation for employment and social well-being. Tekes finances applied and industrial R&D in Finland to the extent of about 400 million euros annually. The Tekes network in Finland and overseas offers excellent channels for cooperation with Finnish companies, universities and research institutes. Technology programmes – part of the innovation chain Tekes’ technology programmes are an essential part of the Finnish innovation system. These programmes have proved to be an effective form of cooperation and networking for companies, universities and research institutes for developing innovative products, processes and services. Technology programmes boost development in specific sectors of technology or industry, and the results of the research work are passed on to business systematically. The programmes also serve as excellent frameworks for international R&D cooperation. In 2005, 24 extensive technology programmes are under way.

Copyright Tekes 2005. All rights reserved. This publication includes materials protected under copyright law, the copyright for which is held by Tekes or a third party. The materials appearing in publications may not be used for commercial purposes. The contents of publications are the opinion of the writers and do not represent the official position of Tekes. Tekes bears no responsibility for any possible damages arising from their use. The original source must be mentioned when quoting from the materials.

ISSN 1239-758X ISBN 952-457-204-4 Cover: Oddball Graphics Page layout: DTPage Oy Printers: Painotalo Miktor, Helsinki 2005

Preface

This document is an internal study of Tekes, the National Technology Agency of Finland, on best practices in selected leading innovative countries. It was carried out between August 2004 and August 2005 by Dr Heikki Kotilainen. The countries were selected partly according to innovation index statistics and partly on Tekes’ own criteria. The intention is not to make a comprehensive study of all leading countries, but rather to gather ideas for new philosophies, methodologies and instruments for innovation support. The document is not aimed to be a work of scientific research on the topic of innovation. It is rather a travel report searching for new points of view on innovation and how the public sector could itself be innovative in requiring innovations and creativity from its customers. Therefore most citations are omitted and only direct quotations are marked. The statistical raw material was collected by Advansis Oy and the Technical Research Centre of Finland, VTT. The survey has been made by the author. The statements, observations and recommendations are made by the author, and are not official Tekes statements. The author would like to offer his sincere thanks to all interviewees for their kindness, their candid and informative advice and the positive atmosphere created during our meetings. Although discussions were very short (only 1–1.5 hours) they were more valuable than written briefings could have been. The author would like to address special thanks to Mr. Tarmo Lemola from Advansis Oy, who has helped with the statistical analysis and with comments and advice during the course of the study. The author is grateful to Finpro for their help in organizing meetings in Canada, Taiwan and Korea. September, 2005 Tekes

Contents

Preface 1

Introduction and Background of the Exercise . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

2

Scope of the Study. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

3

Statistical Survey . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

4

Country Reviews . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 4.1

Canada . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

4.2

Denmark . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

4.3

Germany/Baden-Württemberg. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28

4.4

Korea . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32

4.5

Norway . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41

4.6

Singapore . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48

4.7

Taiwan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60

4.8

USA – Massachusetts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69

5

Lessons Learned and Observations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77

6

Recommendations, Next Practices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83

Annexes 1

Statistics. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85

2

Organizations and people interviewed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87

Tekes Technology Reviews in English . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93

1 Introduction and Background of the Exercise

Introduction The globalisation of industry has triggered an intensive debate on industrial and technology policy in all developed countries. As national policy has been redefined within an international context, the complex interrelations between industry, technology, science and education have led to a discussion on the national innovation system. This has stimulated intensive empirical and theoretical work to examine the impact of these combined factors on an economy, employment and job creation. At the same time the complexity of society has demanded more scientific and research work to address the impact of technology on our daily lives. The expansion of information technology to all sectors of life will necessitate more research work in policies towards sectors such as energy, the environment and communications, social welfare and public health. The need for joint research between technology and the social sciences is foreseen in the near future. There is a clear demand for more intensive research in many sectors, but in most countries public expenditure on research is being cut back. This requires more effective allocation of money − and highly efficient research and development. Innovation is considered to be essential and central in the development of national economy. In all industrial nations, increasing attention has been paid to innovation and more specifically to innovation systems i.e. how the national infrastructure is supporting the creation of innovations. The innovation systems in different countries vary depending on the level of education, research and industrial development and innovation competence.

implementation, with special attention to the different instruments and to their efficacy in supporting innovation. In preparation for the interviews, the following general points of interest were considered:

Key questions concerning national innovation structure Institutional structures • what are the main organizations involved? • what is their role and function in policy design and implementation, and budget allocation? • what are the linkages among these organizations? Organizational structures • what is the structure of the individual organization? • what is the legal set-up of the main organization? • what are the funding instruments and how are they implemented?

Definition of innovation Initially a distinction must be made between inventions, innovations and imitations An invention is an idea, an outline model or something similar, whereas an innovation is an invention that has been commercialised in the marketplace by enterprises. An imitation is an innovation copied by others. Inventiveness alone will not bring economic advantage to a company.

Objective

In this context innovation can be incremental or radical. Incremental innovation is a continuous process, learning by doing; the combined effects of many incremental innovations will bring economic advantage to a company. Radical innovation is a result of conscious research and development effort in industrial, university or governmental laboratories. Radical innovations may have great socio-economical impact. Both incremental and radical innovations can be product or process innovations. Product innovation can be characterised as opening new markets and improving a company’s competitive position, whereas process innovation delivers productivity gains and improves price competitiveness.

The objective of the study is to benchmark and to seek best and next practices relevant for national systems and their

Throughout this document the term innovation refers to one of the concepts described above.

Descriptions of innovation policies are to some extent available in the national white papers on innovation, but the detailed implementation of the varying tools and instruments is usually not well reported. Likewise the efficacy of different tools has not been reported, sometimes due to the difficulty of finding appropriate criteria.

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2 Scope of the Study

The study tries to cover the main instruments for innovation support, but with linkages to general innovation policy in the country concerned. The linkage is important in understanding the philosophy behind of the incentives and mechanisms to support industrial competitiveness. The choice of countries reflects Finland’s interest in benchmarking some leading countries and in finding best practices and ideas that could also be implemented in the Finnish context. The aim is not to copy practices, which may even be impossible, but rather to trigger ideas for promoting innovation more effectively. This is necessary because the character of innovation is changing with the development of globalisation i.e. outsourcing of R&D and manufacturing. Meanwhile the complexity of innovation is increasingly requiring crossdisciplinary knowledge and cooperation. At the same time manufacturing and services are merging, creating new opportunities for innovative business models. The industry-university relationship is one topic in the study because, in many cases, research is necessary to give sufficient scientific depth to the innovation and to find a technical solution to a problem. Research as such is beyond the scope of this study.

Even though the scope is restricted to innovation, it is very broad and can only scratch the surface of the issues involved. Innovation contains elements extending from pure science to industrial pilots, demonstrations and the marketplace.

Content of the report The report contains a description of 53 organizations, their main functions, incentives and criteria for implementation. The description is based on person-to-person discussions, brochures, leaflets, web pages and other material available during the course of the study. The descriptions are objective summaries of innovation support and promotion. The summary after each country survey provides the author’s view and interpretation of the findings, which is subjective and gives only a limited perspective on the functions of the organizations. The chapter Observations and Lessons Learned is an attempt to give a comprehensive picture of the findings, personal observations and impressions of the author. The chapter is not limited to material in the study, but also contains some conclusions on innovation systems and support philosophies.

In many cases new entrepreneurship is related to innovations. Small technology-oriented firms have an innovation in mind when they start up. Therefore the questions related to the creation of new firms are also one of topics in this study.

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3 Statistical Survey

A limited statistical survey was made to create a meaningful comparison between the different countries and to understand future perspectives. The data is derived mainly from OECD and World Bank statistics. Data from some countries is limited or missing from these sources. Some statistics have been received from local authorities. The statistical data is given in the tables in Annex 1.

The emphasis of government policy on supporting SMEs is demonstrated in the amount of R&D investment by small businesses. In this respect Finland is even more active than Denmark.

R&D Statistics (Annex 1a)

Value Added (Annex 1 b)

The table in Annex 1a gives a multitude of statistics related to R&D and innovation performance. The well known figures on R&D/GDP and annual growth indicate the countries that put strong emphasis on R&D. These are Sweden, Finland, Singapore, Taiwan and Korea. In those countries both the absolute level of R&D and its rate of increase have been the highest during past few years. Some differences can be seen in business enterprise funding of total R&D. On average, if R&D/GDP approaches 2.4–2.5%, R&D investment by business is close to or above two-thirds of total R&D. Expenditures on higher education are high in Canada and Norway, which was reflected in the interview results. Strangely Canada is not high on the list of government spending on R&D, but Norway and Taiwan are investing public money in R&D. Business spending on R&D as a share of value added in industry is high in Sweden, Denmark and Finland. This cannot be seen directly in value added creation. (See Fig. 3.1) One might expect business investment in Canada to be higher based on the value added and compared with the other countries. Looking at the service share on R&D, one might anticipate a clearer difference between investment and value added for Norway, Denmark. It appears that investment in Norway produces lower returns than in, for example, the United States. High-tech companies account for a large share of R&D spending by the manufacturing sector, as one would expect. The exception is Germany and this can be seen also in the export statistics Fig. 3.2. However, the low investment by companies in high-tech R&D is not reflected in the patent statistics, where Germany ranks highest. This could be due to the automobile industry, which must patent its inventions.

The proportion of exports by high-tech companies differs greatly, as Fig. 3.2 shows.

It is very clear that the service sector is by far the largest source of value added in all countries investigated. For comparison, data from similar countries (Austria, Ireland, the Netherlands, Sweden) has been included. The share of the service sector varies between 39% in Korea to 52.6% in the USA. However, this obvious feature is not yet reflected in the R&D portfolio. There are some indications in Singapore, Taiwan and Korea that the service sector and its innovations are growing in importance, but clear measurements are not yet available. This is because the nature of service innovation is so different from manufacturing that the correct incentives have not yet been discovered. The same is true for the public sector, where innovation is an unknown feature. However, these two sectors are responsible for 60% of value added creation in the economies of all countries studied. Other sectors of the economy vary little and are far below the size of the service and public sectors. There are a few exceptions, such as the “mining” i.e.extraction sector (oil) in Norway, which represents almost 20% of total value added. The other exception is the chemical sector in Ireland, some 12.5%. The construction sector represents some 4–8% of the total. National comparisons are given in Fig. 3.1. From a policy point of view, it must be asked why R&D and innovation development are not promoted in the largest sectors. The productivity of the service sector could make a great contribution to the economy if it were taken seriously and encouraged.

Share of Manufacturing Exports by Level of Technology (Annex 1c) Annex 1b gives some indications of R&D efforts measured by the level of technology in the exports. There are remarkable differences between the countries. In high-technology exports the leading country is Ireland and the top country

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surveyed is the USA. Ireland also has the highest score in low-technology. For smaller countries like Finland, Sweden, Austria and Denmark, medium-high technology seems to produce the most exports, followed by low technology. This is the case for Canada as well It could be due to the strong forest industry sector in these countries and the food sector in Denmark. Norway is the exception again as the oil business is not normally considered as high or even medium-high technology. These figures are bound to change as manufacturing moves to low-wage countries.

A comparison of national exports is given in Fig. 3.2. Compared with the other countries, Finland presents a quite balanced picture. High and medium technology account for about 60% of total exports. The USA shows a similar pattern with a higher share of high-tech exports. Germany and Norway show a dependence on medium high and medium low technology respectively.

% 60

50

40 Industry Services Public sector Other

30

20

10

0

Finland

Canada

Denmark

Germany

South Korea

Norway

Taiwan

United States

Fig. 3.1. Value added by sectors. Source: OECD

% 60

50

40 High-technology Medium-high technology Medium-low technology Low technology

30

20

10

0 Canada

Denmark

Finland

Germany

Norway

United States

Fig. 3.2. Share of manufacturing exports by level of technology. Source: OECD

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4 Country Reviews

4.1 Canada

The general attitude in all organizations is very businesslike. The public authorities tend to avoid direct support to business and leave business decisions to the enterprises. Public support for business is consequently fairly low. Although WTO rules are unclear, Canada has very clear definitions on subsidies and trade. What is uncertain is how they apply to the lapsed WTO restrictions on R&D assistance. De minimis guides the maximum funding subsidy. Export financing is clear, partly because of pressure from the US, which influences the behaviour of its neighbours.

General overview The system of innovation in Canada consists of support elements in finance/risk capital, skill creation, research and development; knowledge and information; and linkages among all players. At the centre are the firms that the system seeks to provide with global access and markets, and with international contacts. This is demonstrated in Fig. 4.1.1.

Also in other aspects the proximity of the United States gives an apparent basis for comparisons, which may influence governmental decisions. However, all institutions were strongly oriented towards creating benefits for Canada. This is a clear criterion for all public funding.

There are very many organizations providing help with innovation and company creation. It seems to an outsider that every time a new idea for boosting the economy is born, a new organization is created. As a result one can find many organizations with closely related activities that could be more efficiently operated by a single organization. Of course sometimes the system is justified by the huge size of the country, but administrative costs are said to be high because of the many organizations for managing funds and support mechanisms.

Int

er

na

Canada has set the target of 3% R&D/GDP in 2010 similar to European Union. This means an investment of €32 billion in 2010 instead of current €18.7 billion (€1=CAD 1.4945).

Global market

tio

l

na

o ati

ern

na

Int

l Finance & Capital

Linkages

FIRMS IRAP

l na

io at

n

r te

In

© NRC

Knowledge & Information

SME

LARGE

Incubation

NRC Centres

CTN

Skills

Inte

rna

tion

al

Research & Development

Global access

Fig. 4.1.1. Canada’s system of innovation. Source: NRC

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Prime Minister ● Advisory Committee on S&T ● Council of S&T Advisors

Cabinet Cabinet Committee for Economic Union

Minister of Industry

Minister of Industry

Responsible ministers Agriculture & AgriFood

Sec. State R&D

Canada Space Agency

Environment Fisheries & Oceans Health Canada National Defence

Responsible ministers

Responsible ministers

NSERC

Dept. Foreign Affairs and International Trade

SSHRC

NRC

CHIR

Industry Canada/ Research Chairs

CFI

Industry Canada

Canadian International Development Agency

Genome Canada

Statistics Canada

NRC/IRAP IC/TPC

International Development Research Centre

Funders of university and industry R&D

International

Natural Resouces

Line dept. Regulat. policy performers

Performers¨ industrial support

S&T policy

Fig. 4.1.2. Organization of federal S&T. Source: NRC

The organization of Federal Science and Technology is given in Fig. 4.1.2.

It should be noted that industry carries out 55% of all research although it finances only 45% of it. A fairly high amount of funding comes from abroad (12%). Government funding is less than 4% of private R&D funding in companies. Government funding goes mainly to research insti-

The following diagram shows the flow of funding within Canadian entities.

Canada 2002 9,4%

45,3%

12%

Other national sources

Business enterprice sector

Abroad

387,729

2627,516 5778,389

57,47

45,976

512,63 4,598

33,3%

% financed by Sources of finance

Government 209,956

21,455 1844,395 1742,482

22,988

Million constant $ 1995 funding prices and PPPs

9,195

0,766

Private Non-Profit sector

0,2%

Business enterprise sector

55,2 %

Research institutes

Universities etc.

11,7%

32,8%

Fig. 4.1.3. Funding distribution in 2002. Source: VTT

8

Place of performance % performed by

% 7

6 Mining and quarrying Food, drink&tobacco, textiles etc. Wood, pulp and paper products, publishing Chemicals, rubber&plastics Metals Mechanical engineering Electrical machiner&apparatus, instruments Motor vehicles Electricity, gas and water supply Construction Other

5

4

3

2

1

0

Fig. 4.1.4. Value added by industries. Source: OECD

tutes and universities and very little to private non-profit research. Industry provides only 2.3% of total university funding. Industrial value added The full details of the statistical survey are given in annex 1. Fig. 4.1.4 demonstrates the difference in value added creation among the different industries. Comparing this with the figures in Annex 1b one can see the huge difference between manufacturing and services in value creation. This is true for all countries considered. The service sector creates about 47% of value added in Canada. The highest industrial sector, mining and quarrying, creates for only 5.7%. In third place is construction, which is not considered a high tech industry. As for most of the countries studied the value added in different industrial sectors is not reflected in R&D priorities.

Organizations for innovation support and their policies National Research Council Canada, (NRC) (www.nrc-cnrc.gc.ca) The NRC is the most influential and largest federal research organization in Canada. It consists of 19 research institutes, two technology centres, the NRC Industrial Research Assistance Programme (IRAP) and the NRC Can-

ada Institute for Scientific and Technical Information (CISTI). NRC has a presence across Canada. Annual NRC expenditures by business lines are for fiscal year 2003–2004: • Research and Technology Innovation €285m (69.4%) • Programme Management €64m (13.8%) • Support for Innovation and The National S&T Infrastructure €123m (26.1%) • NRC Total €472m (100%) (Source: NRC Departmental Performance Report for the period ending 31 March 2004.) The operating principles of the NRC allow it to earn income. In 2003–2004 its research institutes generated some €53 million from contract research and the repayment portions from IRAP Industrial Research Assistance Program] earned some €31m in the form of royalties. In 2003–2004, NRC revenue was €72m. Its revenue has been rising thanks to licence agreements although patenting is not increasing. Although it is a large player in the Canadian context, the NRC has only a weak involvement in the policy making of the Federal Government. The organization consists of three main sectors: Life Sciences and Information Technology, Physical Sciences and Engineering and Technology and Industry Support. The NRC has 4,500 employees and 1,200 guest workers. In its operating principles, innovation is high on the agenda. Although there is a modest investment in innova-

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tion (€194m), it has a federal focus. The federal budget of 2004 proposes to grant €33m over five years for the commercialisation of university sponsored research. €16.7m will be spent on commercialisation of federal lab research over 5 years and €3.3m will go to IRAP commercialisation programmes. Although Canada’s innovation system appears fragmented, the NRC has a compact approach to innovation that includes conducting research, being a premier vehicle for innovation and contributing to value added through technology development. Its collaborative Research and Development, technology transfer and commercialization support services contribute to knowledge creation and help make the lives of Canadians healthier, more productive and more prosperous. NRC laboratories, other government laboratories, universities and industry collaborate in NRC programmes. NRC has a commercialization and technology transfer programme which is characterized by • Collaborative research agreements • Special interest groups • Intellectual property • New enterprises programme • Spin-offs • Industrial Research Assistance Programme (IRAP) • Technology clusters • Industrial partnership facilities (or incubators) Concerning commercialization, attention is paid to the whole value chain. All elements are scrutinized before funding and results must be measurable. Over a thousand active collaborative agreements were signed during the fiscal year 2003–2004. The total value of these agreements over their lifetime is €226m. There has been an increasing trend in the value of collaborative agreements signed. NRC has moved decisively into strategic areas such as genomics, fuel cells, bioinformatics, e-business, urban infrastructure, nanotechnology and advanced manufacturing. It also has begun new programmes in training of highly qualified youth, pre-commercialization assistance, and sustainable development for SMEs. A lot of attention is paid to IP questions and on achieving the level of protection that will stimulate commercial exploitation. It is worth noting that in Canada different provinces have different rules regarding the ownership of research results. In some cases they belong to the university, in others to the institutes and/or individuals. This was said not to have created major difficulties in university-industry cooperation. The new enterprise programme is focusing on spin-offs/ outs applying a holistic approach and on developing new venture opportunities with NRC technologies. The programme includes an “entrepreneur-in-residence” portion allowing start-up firms to work within the labs and provide

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coaching and mentoring services. Since 1995, NRC has created 58 new companies and raised over €200m in private sector funding. The industry partnership facility is continuously increasing the number of firms co-located at NRC. The current total is 115 companies. Clusters are an instrument for regional development. NRC has developed concepts for 16 clusters in different regions to support innovation – some have received federal funding over a 5-year period. The approach differs from the Finnish model regarding the organizational structure of clusters. In Finland the clusters are freely organized or not organized at all, whereas in Canada the organizational structure is clearer. This allows to government to use clusters as an innovation instrument. The operations of single institutes within NRC are quite independent – each having the opportunity to draw up its own principles concerning research and contacts with industry. The Institute for Information Technology (IIT) for example started with its base in Ottawa, but is now led by the IIT cluster centre established in Fredericton in the eastern provinces. IIT works with the various Canadian clusters and has close contact with industry. It has 9 business developers to commercialize the results and 15 companies working in the labs. It has formulated 3 strategic directions • knowledge from data • people- oriented systems • e-business Innovation capability is measured by two main indicators • patents – money spent • licences – money earned Although there are considerable earnings from licensing, no money targets are set. The strategic directions, indicators and other targets differ between laboratories.

Industrial Research Assistance Programme (IRAP) (www.irap.nrc.gc.ca) IRAP is probably the most relevant programme from Tekes’ point of view as it plays a role in both research and industrial development. The guiding principle of IRAP is to stimulate the innovation capacity and competitiveness of SMEs through technological innovation. However, IRAP provides advice, mentoring and international linkages at the national and regional level, in addition to financial assistance. The focus on SMEs is obvious as there are 1.9 million SMEs in Canada. They account for 99% of all businesses and most of the jobs. IRAP’s task is to promote innovation in SMEs, which has been found to be the key to keeping companies competitive. However, SMEs face many challenges and they need more sophisticated tools because they cannot manage complex innovation on their own.

The IRAP budget for fiscal 2004/2005 consists of €47m for non-repayable R&D support and €20m for repayable support targeted at company pre-commercialization projects with a contribution level of 33–50%. For advice and support €40m is available. Of the total of €107m, core funding is €67m. The rest is provided in 5-year allotments. IRAP considers both the potential projects of a company and the company’s own development. The project should have an impact in creating changes in the company. IRAP seeks to give companies the opportunity to develop their knowledge and technical capability. And finally the technologies should contribute to the company’s growth. Consequently, IRAP provides help in market research (up to 80% of the service), management consulting, strategic planning, competitive intelligence, production/process improvements and international linkages. IRAP also provides services in sustainable development to minimize resource consumption, improve production processes, prevent pollution and reduce waste. IRAP has strong relations of confidentiality with its clients. In order to build links to regional development, IRAP has concluded agreements with the Federal Government’s business development agencies in Western Canada, Quebec, Atlantic Canada and Northern Ontario. The regional offices have also substantial resources of €803m for various forms of business development, not merely for technology oriented or technology driven business. To improve innovation capabilities, these business development agencies provide €2m each for IRAP to serve more clients in their region. The regional agencies tend to develop closer links to federal agencies and have started to establish their own innovation funds, such as the Atlantic Innovation Fund (AIF) – €84m over 5 years. However, working strategies and financial results are not yet known. NRC has received funding for 5 of 14 clusters. Other sources of funding are still open – the concept is hard to sell when the government is seeking a cut of €2 billion in its current expenditure.

Advisory services IRAP stays in touch with its customers via a network of Industrial Technical Advisors (ITAs), which are spread around the country to assist SMEs locally. An ITA is the first contact for a company in its dealings with IRAP and serves as a link to federal labs, including NRC, and to universities as well as international centres. (Note that there are about 20 federal science-based departments with R&D labs across Canada.) ITA staff spend 50% of their time on advisory activities and the rest on IRAP-funded projects. Typically they have at least 10 years of industrial experience. ITAs can help in the following issues: • technical assistance

• • • •

literature and patent search referrals to other programmes and services expertise search linkages and networks to establish multi-party collaboration • diagnostics services

Financial assistance IRAP funding is located between the pure research of the research councils, universities and the marketplace, characterized by high-risk pre-competitive commercial R&D. The funding principle is to share the risks of trying to break new ground. Funding can cover the whole R&D process in order to assist in developing the product, process or service. The content is typically: • Feasibility studies • Pre-project marketing • Strategic technology planning • Technical analysis • Site visits • Access to technology and resources in Canada and abroad • Undertaking of research and development (R&D) • Pre-competitive development (loans) and small pilot projects Some exclusive areas like market entry, final engineering or full-scale demonstration or regulatory approval are not normally in IRAP’s portfolio The company and the project must fulfil certain conditions. R&D must be incorporated, and carried out by a profit-oriented organization having fewer than 500 employees. The criteria considered are: • the potential commercial impact of the product, process or service • the project’s positive impact on the innovation capability of the company • the company’s desire to grow and employ people in Canada • the company’s ability to complete the project and exploit the results in Canada • the project’s ability to generate new sales twenty times the amount of the investment by IRAP IRAP requires that the company can learn from the effort and advance its technological capability, even if the project fails. The mandate was originally to increase technical capability, but this was regarded as inadequate and was changed 10 years ago to ‘Building Innovation Capability”. IRAP does not necessarily fund all aspects of the latter stages, in some cases preferring to point the way to other delivery agents. It does, however, consider the question of what will happen without IRAP help.

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In principle, IRAP projects are divided in three categories: small youth projects, R&D projects, and repayable pre-commercialization projects. In other words these are small projects, large projects, and TPCs (Technology Partnerships Canada).

IRAP – Technology Partnerships Canada IRAP Management divides projects into two types, regular IRAP and IRAP-TPC repayable. IRAP-TPC is so called to distinguish it from regular IRAP and the larger TPC run under Industry Canada, a government department for economic development. IRAP-TPC focuses on SME-led projects with under €1 million in repayable contributions. SMEs with projects over €5.3m and large enterprises] apply to the larger centralized TPC programme. Small projects are characterized by feasibility studies, or technology assessments, problem solving in-house and outside assistance (by students, for example) and small-scale R&D. The funding guideline is a grant of up to €13,382, which typically covers 40–50% of eligible costs, including salaries, overheads and services. Smaller amounts (