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Supporting Canada’s Innovative SMEs
Daegu Initiative
First-Cycle Assessment Workshop
June 7, 2010
Hong Kong, China
Anne Pigeon
Senior Policy Advisor
Small Business & Tourism Branch
1
0.00
0.50
1.00
1.50
2.00
2.50
3.00
Japan Sweden Finland Germany United
States
Total
OECD
Australia Italy France Canada UK
%
2006 2000
Gross R&D expenditure (GERD) as a percentage of GDP,
selected OECD countries, 2000 and 2006
0.00
0.50
1.00
1.50
2.00
2.50
3.00
Sweden Japan Finland United
States
Germany Total
OECD
France Australia United
Kingdom
Canada Italy
2006 2000
BERD as a percentage of GDP, selected OECD countries,
2000 and 2006
Overall Investment in R&D in
Canada is low relative to the other
comparison countries
Canadian business sector has a low
propensity to innovate relative to other
comparison countries.
Canada is the leader in public
expenditures in R&D.
Source: OECD, Main Science and Technology Indicators, 2008-2
Canada’s Position in R&D
2
21.3
2.0
0.271.1
0
5
10
15
20
25
Small (0-99) Medium (100-499) Large (500+)
$ M
illio
ns
Expenditures on R&D
Industry Average
Expenditures on R&D
• Of total R&D spending in 2003, 23 percent came from 10,734 small firms (87 %
of all reporting R&D firms), with an average of $0.27 million per firm.
• 60 percent from 371 large firms with an average of $21.3 million per firm.
Small firms on average spend less on R&D than large firms…Average Expenditures on R&D by Firm Size, 2003
Resesarch & Development
3
2.8
4.8
5.9
2.1
0
1
2
3
4
5
6
7
Small (0-99) Medium (100-499) Large (500+)
Perc
en
t
R&D Expenditures as a %
of Revenue
Industry Average R&D
Expenditures as a % of
Revenue
• Small business that conducted R&D spent 5.9 percent of their revenues on R&D
• Large businesses spent 2.8 percent of their revenues on R&D
• The overall average for all businesses was 2.1 percent.
• Innovative SMEs generated twice as much revenue and profits than non-
innovative firms from 2004 to 2007.
Resesarch & Development…but have a higher R&D intensity than large firms
R&D Expenditures as a Percent of Company Revenues, by Firm Size, 2003
4
Source: SME Financing Data Initiative, Statistics Canada, Survey on Financing of Small and Medium Enterprises, 2004.
•R&D intensive SMEs are those who invest 20% or more of their total expenditure in R&D
•Between 4% and 5% of Canadian SMEs were R&D intensive in 2004.
Profile of Innovative SMEs (2004)
Innovative SMEs Characteristics Non-Innovative SMEs
51.9 % under 40 years Age of majority owner 53.3 % under 40 years
54.9 % more than 10 years Managerial experience of
majority owner 69.9 % more than 10 years
1–2 years old: 22.9 % started during 2002–2004 3–6 years old: 25.1 % started during 1999–2001 7 years+: 52.0 % started prior to 1999
Year firm starting selling goods and services
1–2 years old: 10.7 % started during 2002–2004 3–6 years old: 18.8 % started during 1999–2001 7 years+: 70.5 % started prior to 1999
21.4 % exporters 41.2 % of revenues generated from exports
Export activity
7.7 % exporters 31.9 % of revenues generated from exports
72.7 % intended to expand business
Growth intention 37.6 % intended to expand business
5
Overview of Canada’s Assessment
Area A: Linkages
A4 - Canadian Intellectual Property Office (CIPO) offers
reduced fees to “small entities” (fewer than 50
employees)
A8 – Canadian Youth Business Foundation provides
loans and mentoring services to young entrepreneurs
A9 – Industrial Research and Development Internship
(IRDI) program places graduate students and post-
doctoral fellows in businesses to undertake research
A9 – Industrial Research Assistance Program (IRAP)
provides funding to innovative SMEs to hire science and
engineering students
6
Overview of Canada’s Assessment
Area B: Access to Specialists
B4 – Small Business Internship Program (SBIP) provides
a wage subsidy to small businesses to hire a post-
secondary student to implement IT or e-commerce
projects
B7 – Business Development Bank of Canada (BDC)
offers consulting services to its clients
B10 – IRAP provides advisory services and technical
services to SMEs through its Industry Technology
Advisors
7
Overview of Canada’s Assessment
Area C: Access to Capital
C1 – IRAP provides funding for R&D projects to help
SMEs develop technologies
C6 – Business Development Bank of Canada (BDC) is a
government-owned bank whose mandate is to support
Canadian SMEs
C8 – Canadian Small Business Financing Program
(CSBFP) is a loan-loss guarantee program which helps
small businesses access loans of up to CAD$500,000
8
Overview of Canada’s Assessment
Area D: Networks and Clusters
D1 – National Research Council has established a
network of 11 clusters across Canada
Area G: Measuring Progress
G4 – Statistics Canada measures the innovation
performance of manufacturers and measures R&D
expenditures by firm size
The Business Model
CLIENT
CLIENT
Technical, engineering and business advice
Networking
International partnership/readiness
Technical and economic studies ($$)
Graduates ($)
Projects ($$$)
Strategic information
9
Competitive Technology Intelligence
Diagnostics ($)
Intellectual Property Management
Strategic planning, Market assessment
SME Innovation
• SMEs are most successful
when focused on their
marketplace and client
Many people equate innovation
with R&D. Their notion is that new
ideas from research lead to new
products and services. This belief
is erroneous.
Innovation occurs by identifying
needs and finding a way to meet
them.
H. Douglas Barber and Jeffrey CrelinstenOttawa Citizen, March 23, 2010
10
Bluedrop Performance Learning, St. John’s NFLD
11
Who are IRAP’s clients?
NRC-IRAP worked with
8,053 small and medium-sized
enterprises (SMEs)*
in 2008-2009, of which 1,604
received funding.
*Firms with up to 500 employees
• 78% had less than
50 employees
• 60% have fewer than 20
employees
0
500
1000
1500
2000
2500
3000
ON QC BC AB MB NB NL SK NS PE
NRC-IRAP’s Number of Clients by Province
for FY 2008-2009
Province
# o
f C
lie
nts
116175158216293278
836
1045
2312
2526
12
What are the clients’ challenges?
• Difficulty sourcing
(investment) capital
• Management capacity
challenges
• Limited national and
international networks
• Do not have enough
R&D resources and
technical expertise
0
2
4
6
8
10
12
14
16
18
$ M
12.0
16.3
1.42.8
9.810.1
8.3
2.6
15.4
5.2
Expenditures by Industry Sector
in FY 2008-2009 ($86.9M)
3.1
13
What does IRAP provide?
• Customized technical and business advisory services
• Strategic and scientific information
• Linkages to other organizations, potential partners, investors
• Financial support
BTI Photonics, Ottawa, ON Medicago, Québec, QC
What sort of financial supportdoes IRAP give?
Pharmatrust, Toronto, ON
14
• Financial contributions to firms
to develop technologies
• Financial contributions to
organizations providing services
to SMEs
• Financial assistance to hire new
graduates (YEP)
15
IRAP Field Staff
Experience
• 240 ITAs
• All have extensive R&D
and management
experience in industry
• 75% have Masters
or PhD
• 45% have run their own
R&D facility
• 34% have been
entrepreneurs
Outreach
• Field staff are located
in 147 offices in
100 communities
• Each work with
42 clients per year
• 11 of their clients will
receive funding from
NRC-IRAP
• Typically make 105 client
site visits a year
Services• R&D project advice
• Competitive
Technical Intelligence
• Networking and linkages
• Funding opportunities &
programs
LEGEND
NRC-IRAP Industrial Technology
Advisor (ITA)
NRC-IRAP Regional Office
NRC Institute
NRC Cluster
Where does IRAP support clients?
16
How NRC-IRAP works with organizations, universities, colleges and
cegeps
• NRC-IRAP staff co-located
at organizations, universities
and colleges
• Expert services and
information
• Enhance linkages across
provinces and countries
• Participate in sectors,
clusters and national
programs
17
How do we get to work together better?
• Field staff to know each
other locally and in their
sector of interest
• Ensure that local staff
knows about what each
other can do for the SMEs
• Become a part of each
other’s tool kit
• Personal relationship is the
key
18
Kinek Technologies, Saint John, NB
19
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