Characteristics of the Support Provided by WD

Since the inception of the Department, WD has played a leading role in supporting innovation-related projects and activities in Western Canada. This section provides an overview of assistance provided by WD related to promoting innovation in Western Canada.

These characteristics are further highlighted below:

1. WD Has Provided Extensive Financial Support for Innovation
   
   Table 3.1 summarizes the number of projects and amount of funding approved by WD under various development programs between 1995-96 and 2001-02. Because of the close relationship between innovation and economic development, virtually all of the development activities undertaken by Western Economic Diversification Canada are designed, in some measure, to promote innovation.
   

   Table 3.1
   Funding Approved Under Various Western Economic Diversification Programs From 1995-96 to 2001-02

   Name of Program	Period	Projects Approved	Funding Approved ($ million)
   Western Economic Partnership Agreements	1998-2002	185	$74.2
   Western Diversification Program	1995-2002	242	$104.9
   Strategic Initiatives and Special Projects	1995-2002	234	$113.2
   First Jobs in Science and Technology	1997-2002	589	$26.4
   International Trade Personnel Program	1995-2002	645	$24.1
   Canada Foundation for Innovation Support Program	1998-2002	102	$2.0
   Conferences Sponsorship Program	1996-2002	641	$3.1
   Innovation and Community Investment Program	2000-2002	47	$20.7
   Total		2,685	$368.6

As indicated, between 1995 and March 31, 2002, 2,685 projects and $369 million in funding was approved under these programs. A brief description of these development programs is provided below (a more detailed description is provided in Appendix V):

In addition to these programs, WD has also delivered other programming that impacts on innovation-related activities. These programs include:

1. • Under the Loan Investment Fund Program (LIFP), WD has established loan fund programs with a number of financial institutions across Western Canada to increase the amount of capital available to businesses in sectors that are typically considered a high risk such as advanced technologies, information technology and telecommunications, and agricultural value-added processing.
     
   • WD delivers a range of programs and services to SMEs through its Western Canada Business Service Network. The Network incorporates over 100 points of service including CFDCs, Women's Enterprise Initiative offices, Canada Business Service Centres, Francophone Economic Development Organizations and WD offices located throughout rural and urban Western Canada.
     
   • Technology Assessment Services, designed to assist SMEs assess whether to develop a technology for commercialization, are offered through a joint effort of WD and the Canadian Innovation Centre.
      
      

2. WD is a Catalyst Working in Partnership With Other Organizations

   Although WD has provided significant amounts of funding for innovation-related activities, the role of the organization is best characterized as that of a catalyst which makes strategic investments. The results of our review indicate that:

   • WD funding for innovation accounts for only a relatively small proportion of funding on technology related activities in Western Canada.
     
     For example, the $46 million spent by WD on innovation activities in the fiscal year ending March 31, 2001, would represent only 4% of the Federal Government expenditures on S&T in Western Canada and only about 1.4% of R&D expenditures in Western Canada.⁶ As a result, WD expenditures must be made very strategically and be highly levered if they are to impact on the innovation system in Western Canada.
     
   • Most of the activities supported by WD also received funding from other sources.
     
     In some cases, WD serves as the primary source of funding for a given project. In other cases, the funding from WD acts as a catalyst to attract other funding or tops up funding from other sources to ensure that the project proceeds in timely fashion and at an appropriate scale. In still other cases, WD may fund the early stage development of a given project which will then attract significant funding from other sources for the implementation of future stages. Overall, WD funding has, on average, represented about 28% of the total costs of the projects supported by WD. In other words, approximately $2.56 has been invested by others for every $1.00 invested by WD. The reliance on WD funding ranges from about 20% of total project costs for the conference sponsorship projects to 74% of the costs associated with developing proposals for CFI as indicated below.
     
     

     Table 3.2
     Average Leverage by WD Funding Program

     Name of Program	WD Funding ($ millions)	Total Costs ($ millions)	Percent Funded by WD
     Western Economic Partnership Agreements	$74.2	$339.0	22%
     Western Diversification Program	$104.9	$249.5	42%
     Strategic Initiatives and Special Projects	$113.2	$480.5	24%
     First Jobs in Science and Technology	$26.4	$73.9	36%
     International Trade Personnel Program	$24.1	$73.0	33%
     Canada Foundation for Innovation Support Program	$2.0	$2.7	74%
     Conferences Sponsorship Program	$3.1	$15.7	20%
     Innovation and Community Investment Program	$20.6	$76.0	27%
     Total		$1,310.2	28%

     
     
   • WD places a high priority on working in partnership with other federal departments and agencies, provincial governments, community-based organizations, and other stakeholders involved in innovation.

     Since 1995, it has been WD’s policy not to offer direct assistance to businesses except in circumstances where it has been authorized by WD’s Executive Committee and is determined to be the more cost-effective delivery mechanism for providing assistance to WD’s target clientele. Rather than direct financial support to businesses, WD innovation activities and investments place a high priority on fostering public private research institution partnerships and consortia.

     The results of our interviews illustrate the breadth of involvement that WD has had with other members of the innovation support system in Western Canada. Of the 70 representatives of the innovation support system we surveyed, all indicated at least some involvement with WD on innovation-related projects or issues. On average, the representatives rated the level of their interaction with WD as a 3.6 on a scale of 1 to 5 where 1 is no interaction at all, 3 is some interaction and 5 is extensive interaction.

     
     

     Table 3.3
     How Much Interaction Related to Innovation Have You Had With WD?

     

     
     When asked to provide examples of programs, projects, initiatives or forums in which they participated with WD:
     
     • 50 respondents identified one or more specific projects;
     • 23 respondents identified joint planning, strategy and coordination sessions; and
     • 10 respondents identified trade shows, conferences or other forums.
         
3. WD Provides Hands-on Assistance in Addition to Funding

   While the financial assistance is often the most visible type of support provided by WD, the role of WD staff in bringing together groups, formulating partnerships, nurturing champions, and assisting in the design of projects and initiatives can be the most critical contribution that WD makes in the promoting the development of a given cluster. WD Project Officers often characterized the role of the Department as helping to fill the gaps that may exist in the innovation system for a given cluster, noting that their level of involvement varies depending upon the nature of the gaps to be filled and the resources available from other sources. In some circumstances, WD may even provide hands-on assistance in areas such as path finding or advocating on behalf of projects or clusters but provide no funding.

   To illustrate the types of roles played by WD, we asked the 66 proponents of systemic projects whether WD played an important role in the design, development or implementation of their projects in addition to providing funding. Of the 66 representatives, 40 (61%) indicated that WD played an important additional role (the percentage is 69% if the proponents who received funding under CFI-SP are excluded). Examples of the roles that were identified as being played by WD included:

   • Participated as a key member of the steering committee or group;
   • Assisted in designing the project and reviewing the proposal;
   • Played a lead role in bringing the various partners together;
   • Assisted in obtaining funding from other sources;
   • Provided strong strategic advice related to the project;
   • Served as a champion for the project within government; and
   • Conducted extensive due diligence related to the project.

   
   It was noted that WD’s involvement can help to give a project credibility.

   The nature of involvement can vary by region. For example, in Manitoba and Saskatchewan, where fewer resources are available and capabilities are less developed, WD staff may take more of a leadership role and spend more time working with others in developing projects. In Alberta and BC, where infrastructure capabilities are more developed, WD staff may spend more time responding to requests for assistance.

   Apart from its direct involvement in projects, WD has also worked closely with other organizations to identify provincial and pan-Western priorities, to facilitate joint planning, to work to strengthen innovation programs and services, and to address the "innovation gaps" that exist in the West as a result of a lack of investment in research and development in key sectors. This priority is reflected in WD’s participation in various forums such as the Western Forum of Senior Innovation Officials, WEPAs, and the Industry Portfolio. In particular, it was noted that WD has developed strong relationships with the Provincial Governments.

4. WD is Increasingly Focused on Clusters
   
   The underlying objective for improving innovation performance is to facilitate the further development of industrial clusters in Western Canada. Recent economic theory uses the cluster model to describe the development of concentrations of firms. Members of an industrial cluster are not limited to one industrial sector but rather include a series of manufacturers, suppliers and service providers along the value chain from basic to final products. The appeal of the cluster theory is that it views firms and sectors in the context of a larger industrial system. The firms and sectors may be linked through, for example, their dependence on similar labour skills, use of similar technologies, or focus on common or similar groups of goods and services. The cluster is supported by an innovation system which may include universities and colleges, research institutes, financing institutions, incubators, business services and advanced communications/transportation systems.

Table 3.4
Innovation Funding by Knowledge-Based
Clusters From April 2000 to March 2002
(Funding in $ Millions)

1. WD Support Can Be Targeted At Any Element and Stage in the Innovation System

   WD supports a wide range of initiatives to enhance innovation performance in Western Canada. For example, various programs and initiatives seek to strengthen the strategic infrastructure, encourage investment in research & development, support new technology adoption and commercialization, improve manufacturing productivity, facilitate specialized skill development, and increase investment in value-added production. WD investments are made to strengthen both the individual elements of the western innovation system and the linkages between the elements.

   The following table summarizes some of the ways in which WD has worked to improve various elements of the innovation system in Western Canada.

   Table 3.5
   Examples of Support Provided by WD

   Elements of the Innovation System	Examples of Activities Undertaken By WD
   Political, legal and macroeconomic environment	· Advocating the interests of the West in federal economic policy · Identification of gaps and coordination of development initiatives, programs and projects with Provincial Government organizations and other Federal Government organizations through mechanisms such as the WEPA programs and the Senior Officials Forum on Innovation · Preparation of regional cluster competitiveness and development strategies
   Demand conditions	· Support for export and marketing initiatives · Advocating in government procurement · Promoting the strengths and capabilities of Western Canadian companies within national and international forums
   R&D/Technology Infrastructure	· Support for investments in physical infrastructure (e.g. buildings, equipment, and labs) · Support for proposal development aimed at increasing participation in CFI, which provides support for the development of research infrastructure · Support for ILOs, innovation centres, technical support services, and pre-competitive research that helps facilitate technology transfer and commercialization· Support for pilot tests of new technologies
   Linkages	· Focus on partnerships involving public sector organizations, industry, and research institutions in its projects · Assistance in developing and increasing the capacity of cluster champions and coordinating bodies · Support for conferences that bring together parties active in the innovation process
   Human Resources	· Support for the establishment of education and training programs · Support to help companies hire recent S&T grads and interns to assist in technology development, commercialization and adoption projects
   Capital	· Increased access to capital through loan reserve programs, Community Futures and other programs· Provision of direct assistance to businesses (prior to 1995)
   Commercial Information	· Economic research and analysis · Market information obtained through opportunity identification, planning, strategies, and cluster studies · Technology assessment services
   Company Operations and Strategies	· Support for conferences related to technology and innovation · Support for E-business initiatives · Support targeted at improving business mgmt capabilities

   
   Initiatives related to innovation can also be viewed in terms of their position on a continuum which stretches from initial or basic research through to the development process which can involve technology transfer, applied research, and commercialization of new products and process. Within its mandate of promoting economic development and diversification of Western Canada, a major focus of Western Economic Diversification Canada has been on development (i.e. technology transfer, applied research, and commercialization). However, this has not precluded WD from supporting activities related to earlier stage research (primarily in the form of investments in infrastructure) where it was demonstrated that:

   • The cluster holds significant potential to diversify and further develop the economy of Western Canada;
     
   • Capabilities related to early stage research are the initial constraint to further development of the cluster. Support for latter-stage commercialization activities is not warranted if the technological knowledge base on which the cluster will be built is not yet in place.
     
   • No other organizations are in a position to provide the assistance needed by the emerging cluster.

Table 3.6
Total Funding by Type of Innovation
Activity from April 2000 to March 2002
(Funding in $ Millions)

⁶ A summary of Federal Government expenditures on Science & Technology, by province is provided in Table IV.11 in Appendix IV