IN SEARCH OF IMPACT AND OUTCOME INDICATORS BASED ON VANCOUVER BIOTECH CLUSTER STUDIES

Monica Salazar & Adam Holbrook

CPROST-Simon Fraser University

Vancouver, Canada

Outline of presentationIntroduction: need for new indicators1. Overview of Vancouver biotech cluster,

compared to Montreal and Toronto2. Role of universities: inputs (public R&D

funding) and outputs (patents, scientific publications)

3. Outcomes of R&D funding: commercialization of research, venture capital financing, employment

4. Conclusions

Statistical issues Definition: biotechnology vs life sciences

Human health biotech: our focus SMEs vs multinational pharmaceutical

companies SMEs mainly, usually called “SBF”

Data at provincial or city level Clusters in Canada are limited to a single city or

metropolitan area: need of data at city level

2001 is the reference year (as much as possible) Normalization: population, HQP, innovative firms

1. Comparison of Canadian biotech clusters (Stat Canada Biotech Survey 2001)

Cluster Biotech Innovative Firms

Biotech Revenues $M

Biotech BERD $M

# of Biotech Employees

# of Bio-Scientists

Montréal 80 1017 113 2935 70

Toronto 55 1094 85 2661 47

Vancouver 48 N/A *258 1701 80

Subtotal 183 2110 456 7297 197

Canada 375 3569 1337 11897 430

Vancouver: distinct characteristics

Firms recognize the cluster: 59% Networking patterns and interaction between various

actors: No vertical integration Neither horizontal integration nor competition among firms

Each firm works in specific niche of technologies or products, knowledge coming from local researchers

Little local manufacturing, IP producer No competition for local talent Competition for venture capital financing

Role of location and lifestyle are contributing factors, for instance:

Why located in Vancouver: 85% founders from the city, with local connections (labs), (and city is nice)

Advantages of the city: cluster existence and facilities -R&D labs, VCC, CROs- associated with it (and city is nice)

Factors contributing to growth of the cluster and the firms (most important first): research institutions, supply of workers with particular skills, co-location with other firms in the same industry, educational and training institutions.

Location, location, location

2. Role of research institutions: Inputs and Outputs Biotech industry: research dependent, though universities and public R&D funding are

essential. Universities are a necessary but not sufficient

condition for cluster emergence. Regions must offer fertile climate and soil to

allow seeds from universities to flourish.

R&D funding for biotech 2001(CIHR and NSERC biology)

0

10

20

30

40

50

60

70

80

Millio

ns o

f d

ollars

NSERC

CIHR

Tests to qualify impact of R&D funding in cluster creation and development (Clayman & Holbrook, 2003)

R&D intensity: R&D expenditures normalized by HQP “Productivity” indicator in terms of IP (allocation

mechanisms) HQP intensity: HQP normalized by labour

force R&D intensity and HQP intensity

Measure of receptor capacity

Year-to-Year Changes in NSERC R&D Intensity for 15 Major Cities

Hamilton

Ottaw aCalgary

Toronto

VancouverMontreal

Regina

Québec City

St. John'sSaskatoon

London

Sherbrooke

KWG

Kingston

Edmonton

WinnipegOttaw a

Toronto

Calgary

Québec CityLondonHamilton

Edmonton St. John's

Saskatoon

Sherbrooke

KWG

Kingston

VancouverWinnipeg Montreal

Regina

0

200

400

600

800

1000

1200

9% 10% 11% 12% 13% 14% 15% 16% 17% 18% 19% 20% 21% 22%

HQP/Pop

2002-2003

1998-1999

Regina

KWG

Toronto OttawaVancouver

London

Sherbrooke

Kingston

St. J ohn's Québec CityWinnipegSaskatoon

Montreal

EdmontonHamilton

Calgary

Regina KWG

Toronto

Vancouver

Calgary

Ottawa

Winnipeg

St. J ohn'sSaskatoon Montreal

Québec CityHamilton

Edmonton

London

SherbrookeKingston

0

100

200

300

400

500

600

700

9% 10% 11% 12% 13% 14% 15% 16% 17% 18% 19% 20% 21% 22%

HQP/ Pop

2002-2003

1999-2000

Year-to-Year Changes in CIHR R&D Intensity for 15 Major Cities

Patenting activity

Output measure of R&D activity Relationships through patents between companies

and researchers, involvement in creation of start-ups (economic relations)

Patents as a knowledge spillover measure Number of patents and patent citation real factors

of employment growth in biotech companies (Queenton & Niosi)

Bio-scientists U.S. Patents by Canadian cities in 2002 (Queenton, 2004)

20.6%

24.0%

23.6%

10.1%

8.2%

5.7%

3.8%3.5% 0.6%

Montréal

Toronto

Vancouver

Québec City

Edmonton

Calgary

Winnipeg

Ottawa

London

Scientific publications

Publications more or less follows the R&D funding pattern, although …

Vancouver bio-scientists publish less per millions of dollars invested (public R&D funding). Why?

One possible answer is the closer relationships these researchers have with local firms.

Scientific publications

Cluster Number publications 2000

R&D funding for biotech 2001 $M

Publications per$M invested

Montréal 291 68.0 4.3

Toronto 279 52.2 5.4

Vancouver 165 49.0 3.4

Subtotal 735 169.2 4.3

Canada * 1291 391.6 4.9

Measures of biotechnology activity in metropolitan centres (VEDC, 2002)

Biomedical research capacity and activity

Lower Mainland / Southern Vancouver Island

52 – centre average (US cities)

CIHR/CFI funding 2000

US$34.5 millions US$225.5 millions

Patents files at US Patent Office 1990-1999

354 676

Research Index 0.34 1.0

Measures … cont.BiotechnologyCommercialization

Lower Mainland / Southern Vancouver Island

52 – centre average (US cities)

Venture capital 1998-2001

US$204.1 millions US$191.3 millions

Value of R&D alliances

US$290.0 millions US$203.0 millions

Biotechnology firms with 100 or more employees

6 6

New biotechnology firms 1991-2001

60 9

Commercialization Index

2.50 1.0

3. Outcomes of R&D funding

Commercialization of research: hot topic Licensing (patents) University spin-offs: no official collection of statistics

Venture capital raised Human resources: HQP, employment

creation/growth, attraction and retention of talent

Biotech spin-off companies 1995-2001 (Holbrook & Clayman, 2003)

Clusters Active Inactive Total Survival Rate

Active per 100,000 HQP

Montréal 31 13 46 67.4 6.0

Toronto 23 9 32 71.9 2.7

Vancouver

19 7 26 73.1 5.6

Venture capital financing $M(MacDonald & Assoc.)

Cluster 2002 2003Venture capital per

innovative firm

Montreal 167.7 152.9 2.1

Toronto 100.6 74.5 1.8

Vancouver 71.9 43.1 1.5

Subtotal 340.2 270.5 1.9

Canada 479.0 392.0 1.3

$-

$100 000

$200 000

$300 000

$400 000

$500 000

$600 000F

un

din

g (

$1

000

s)

Montre

al

Toronto

Vanco

uver

Ottawa

Quebec

Win

nipeg

Calgar

y

Kingst

on

Edmonto

n

London

Halifa

x

Saska

toon

City

Venture Capital and CIHR Funding Per City 2000-01 to 2003-04 (NRC & SECOR, 2004)

Venture Capital CIHR Funding

Human resources, talent & employment Input (HR, HQP) and outcome (employment) New economic geography of talent Relations between talent and quality of life of places (R.

Florida) What is the impact in cluster emergence and development?

(firms follow people) Industrial agglomeration: economic, social & cultural factors

Vancouver is attracting people: 70% top management have Ph.D. degrees from non-local universities (new data being collected)

Bio-scientists play a major role in the location and growth of firms

Vancouver firms have a different employment structure

Human resources data (Stats Canada)

Cluster Pop. Millions

Employ-ment Millions

HQP Millions

# Biotech Employees

Share of Biotech Employ-ment

Avg. emplo-yees innova-tive firms

Montréal 3.50 1.68 .51 2,935 24.7 36.7

Toronto 4.88 2.41 .87 2,661 22.4 48.4

Vancouver 2.08 1.00 .34 1,701 14.3 35.4

Subtotal 10.46 5.09 1.71 7,297 61.4 39.9

Canada 31.02 17.05 3.68 11,897 100.00 31.7

Distribution of biotech employees in innovative firms (NRC & SECOR, 2004)

Montrea % Toronto % Vancouver % Tot %

Sci. research/

direction

509 35.3 354 27.7 416 41.4 34.4

Technicians 400 27.7 274 21.5 261 26.0 25.1

Reg. Clinical Affairs

52 3.6 109 8.5 28 2.8 5.1

Production 154 10.7 51 4.0 60 6.0 7.1

Finance/Mrktg. 125 8.7 336 26.3 54 5.4 13.8

Mgmt. 189 13.1 135 10.6 120 11.9 11.9

Other 13 0.9 17 1.3 66 6.6 2.6

Total Major Clusters

1442 100 1276 100 1005 100 100

Conclusions

Identified factors and conditions that contribute to the emergence and success of regional clusters [Vancouver]:

Strong university research-oriented [UBC], Funded by public granting agencies [not as important], An entrepreneurial spirit [crucial], Availability of venture capital [critical], A favourable location and environment, so that talented

people is attracted to these places [sticky labour market]. Research capacity is a necessary but not a sufficient

condition.

What do the indicators tell us? Is Vancouver significantly different in structure, not

just size, from Toronto and Montréal?

Is Vancouver biotech industry an emergent or a research-based cluster?

Vancouver is a R&D-based cluster: local firms invest more on R&D, large pool of bio-scientists, who are highly productive (patents), firms employ more scientists and technicians, and there is little manufacturing.

Why do Vancouver perform well in outcomes, but not very good in inputs and outputs? Are we measuring the right issues? Need for new indicators.

Is Vancouver a viable cluster? The model of being an IP producer cluster seems to

work. It seems that we do not need a manufacturing facility or

pharma company to further develop the cluster. If the largest local company were to relocate or

disappear it is unlikely that the cluster would be jeopardized. New ideas, new firms, new people will come.

Policy advice: environment is key; more R&D money would be good.

Need of longer-term studies.