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

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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

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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

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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

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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

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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

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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

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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

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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

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Bluedrop Performance Learning, St. John’s NFLD

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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

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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

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$ 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

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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

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• Financial contributions to firms

to develop technologies

• Financial contributions to

organizations providing services

to SMEs

• Financial assistance to hire new

graduates (YEP)

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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?

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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

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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

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Kinek Technologies, Saint John, NB

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