SEIZING OPPORTUNITIES: UNLEASHING INNOVATION AND ENTREPRENEURSHIP

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Sourced by NCFA Canada from the Ontario Ministry of Economic Development and Innovation | Posted on Feb 1, 2013

Jobs and Prosperity Council

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:

  1. 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;
  2. Introducing a business-led  commercialization voucher to better  link research to business needs;
  3. 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;
  4. 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
  5. 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).

Ontario R&D Spend

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.

Venture Capital Investment per capita

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.

Advantage Ontario Recommendations 6

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.

Resources:
Jobs and Prosperity Council
Minister of Economic Development and Innovation Statement

 

Click to access the full 40 page "Advantage Ontario" PDF --> here

 

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