September 26th, 2018
SEIZING OPPORTUNITIES: UNLEASHING INNOVATION AND ENTREPRENEURSHIP
Sourced by NCFA Canada from the Ontario Ministry of Economic Development and Innovation | Posted on Feb 1, 2013
On Dec 19, 2012, the Ontario Jobs and Prosperity Council released the "Advantage Ontario" study that identified "Ontario's Future Prosperity Depends Upon Action by All Economic Players". Ontario and the rest of Canada's prosperity will decline unless collectively we become more competitive and seize opportunities in the new global economy.
"Unleashing Innovation and entrepreneurship" is one of the recommendations the council highlights as essential to accelerating the commercialization of new products, ideas and services in Ontario to compete globally by:
- Working in partnership with the federal government and the private sector to create a venture capital initiative to improve the quality and levels of risk capital funding in Ontario;
- Introducing a business-led commercialization voucher to better link research to business needs;
- Enhancing the collaboration between research institutions and the Ontario Network of Excellence (ONE) to meet the research needs of business and to improve the commercialization of the work of faculty and students;
- Rigorously reviewing the results of commercialization programs to ensure strategic outcomes are met while continuing to explore other measures that could increase the risk capital pool; and
- Examining modifications to security and investment rules to facilitate crowd-funding and access to capital for new and emerging ventures, while still providing appropriate protection to investors.
SEIZING OPPORTUNITIES: UNLEASHING INNOVATION AND ENTREPRENEURSHIP
* The following section has been sourced from pages 17-19 of the 'Ontario Advantage' study (click to access the FULL study)
Expanding and connecting the innovation ecosystem
Ontarians and their government have recognized the fundamental economic importance of entrepreneurship and innovation: we benefit from strong research institutions, innovative clusters and a set of targeted incentives and supports to promote entrepreneurship and innovation. Yet, we have seen that Ontario businesses lag behind many of their competitors when it comes to investing in R&D, they file fewer patents than their competitors and they focus less on innovation. While many factors influence these outcomes, we have focused on limited industry-academic collaboration, the scarcity of risk capital and the lack of an entrenched culture of entrepreneurship.
More private sector investment in R&D is required.
Ontario should be a leader in R&D. Our university research capabilities are strong: post-secondary education expenditure on R&D (as a proportion of GDP) is first in the G7. And yet, our business sector’s innovation performance is relatively weak, investing less in R&D than U.S. firms despite generous tax incentives. Figure 5: Ontario Firms Spend Less on R&D, Driving an Overall R&D Gap. As a result, Ontario’s gross expenditures on R&D remain well below U.S. levels (see Figure 5).
Patent and commercialization activity needs to be accelerated
The lack of R&D investment is manifested in a significant patent gap with North American peers, who produced 48 per cent more U.S. patents than Ontario firms on a per-employee basis from 2006 to 2010.iv Patents are the result of successful, novel R&D, and the number of patents granted (usually measured per capita or per employee) is an important indicator of a jurisdiction’s innovation capacity.
Factors other than R&D spending impact patent activity as well. Ontario’s post-secondary institutions are leaders in producing high-quality scientific research papers (Ontario accounts for almost half of Canadian research output),vi but studies show only a small percentage of firms collaborate with public research organizations,vii potentially limiting commercialization activity. Further, Ontario’s approach to industry- academic collaboration tends to be driven by researchers rather than by private sector identification of market opportunities, and is not focused on commercialization. By shifting the nature of this collaboration so that businesses play a larger role in identifying applied research opportunities at academic institutions, Ontario’s economy would benefit from enhanced commercialization and innovation outcomes.
In general, Ontario businesses need to accelerate the development, production and commercialization of best-in-class products and services. Stronger linkages with research institutions will help in the earlier stages, but there is also a need to address gaps in venues for the demonstration of market-ready products. Many jurisdictions leverage public sector procurement to push the development of innovative products, particularly in dynamic growing companies. These types of strategic procurement policies and initiatives enable public sector buyers to become valuable reference clients for innovators, which can lead to accelerated growth plus a source of financing and this per-mits access to other sources and a boost in sales domestically and abroad.
Lack of risk capital
Young, innovative firms often have trouble accessing tradition- al sources of capital because these firms are taking significant risks on new technology, processes or markets. The availability of a broad range of risk capital, including angel funding and venture capital, is essential to the birth and growth of innovative Ontario firms. Talented entrepreneurs with new ideas may be lured to other countries or competing jurisdictions with stronger risk capital markets.
In a comparison of the top 20 North American jurisdictions for venture capital investment in 2011, Ontario ranked 18th on a per capita basis (see Figure 6). While Ontario appears to be improving, more needs to be done to expand sources of venture capital.
The quality of risk capital is as important as the quantity. High- growth innovative firms need a venture capital sector with a depth of expertise and knowledge that can provide advice on a range of business and market issues. Ontario’s venture capital sector needs to focus on attracting investors with such experience and a track record of success.
Strengthening Ontario’s culture of entrepreneurship. An entrepreneurial culture is essential for a globally competitive, innovation-based economy. By building new businesses, entrepreneurs create jobs and push established firms to new levels. However, Ontario lags behind leading Canadian jurisdictions. British Columbians, for example, were 20 per cent more likely to start a new business with at least one employee in 2011 than Ontarians were.ix Ontarians have actually been the most reluctant Canadians to launch new enterprises since the recession.x
To address this, we must focus on developing an entrepreneur- ial mindset beginning at an early age, raising Ontario youth’s awareness of the benefits of entrepreneurship.
An entrepreneurial culture not only encourages the creation of new firms; it also supports the development of those start- ups into high-growth companies and, ultimately, multinational success stories. Entrepreneurs rely on “soft infrastructure” – communities of thinkers, researchers, entrepreneurs and investors – to grow. In this respect, Ontario should be a great place to start an innovative business. It is home to established, successful clusters like the life sciences cluster in Toronto and the information and communication technology clusters in the Greater Toronto Area, Kitchener-Waterloo and Ottawaxi, as well as to public-private-academic consortia such as MaRS, Communitech and Invest Ottawa. However, more could be done to enhance these clusters.
Entrepreneurs in Ontario also benefit from a successful pan- provincial regional entrepreneurship network – the Ontario Network of Excellence, Small Business Enterprise Centres and Business Advisory Services – which assists entrepreneurs and cultivates the growth of young innovative businesses.
Ontario also needs to focus more on a new wave of “social” entrepreneurs who are finding ways to apply novel approaches to solving social and environmental problems. The social innovation and social enterprise sector is undergoing rapid growth and is seen as a new way of doing business.
In light of the recent announcement of $400 million in federal funds to support venture capital, the Jobs and Prosperity Council recommends that the provincial and federal governments work together to consolidate their risk capital resources and align their strategies to create larger venture capital funds with the needed expertise. Success will require co-investment by institutional investors and the private sector. Achieving scale is important
in attracting talented management with domain expertise. Fund managers should also co-invest in the fund to align incentives and maximize the potential positive impact for Ontario.
High-quality risk capital is imperative for creating high- growth firms and driving the province’s innovation ecosystem. The provincial government should explore other measures to promote investment in risk capital, such as an angel tax credit or other investor program, with a specific focus on assisting export-oriented growth companies.
As a start, the provincial government should examine modifying its security and investment rules with the objective to eliminate barriers to crowd- funding and access to capital for new and emerging ventures, while still providing appropriate protection to investors. - Ontario Jobs and Prosperity Council
To translate Ontario’s research strength into stronger patent and commercialization activity, the provincial government should create a business-led commercialization voucher, which would facilitate businesses approaching a public research institu- tion to solve a specific problem. A business-led voucher would support firms in working with public research institutions to develop customer-focused innovations. To promote export growth, the voucher could be targeted to export-oriented companies in tradable sectors. Federal resources and programs (such as the Industrial Research Assistance Program) should be leveraged in order to maximize the voucher effectiveness and impact.
The Ontario government needs to ensure that collaborative research funding (specifically within the ONE) is industry driven, and better aligned with the research and innovation needs of more sectors and regional clusters with the greatest potential for growth. Technology transfer components of research institutions should expand and place greater emphasis on commercialization (i.e., the mobilization of knowledge to the private sector). At the same time, research institutions need to better utilize resources available within the ONE to support entrepreneurship activities and spin-off companies launched by students and faculty members.
There must be a more rigorous capacity to track the success of our commercialization programs and initiatives in Ontario. This should include regular review of outcome effectiveness and performance measurement and benchmarking.
Click to access the full 40 page "Advantage Ontario" PDF --> here