Cultivating the Economic Benefits from Canadian Discovery Research

Ted Hsu
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Update [January 2015]: I understand that the Board of Green Centre has now moved its business model more towards a fee for service model for industry, and moved away from the more risky long-term nurturing of early stage commercialization of  green chemistry discoveries. I think the federal government, as a public institution, should be focusing more on the long-term, risky, early-stage commercialization area, where investors are lacking, and where free market forces are not doing a satisfactory job of creating new Canadian companies out of the fruits of basic research.

The success of GreenCentre as a Centre of Excellence for the Commercialization of Research (CECR) in cultivating the economic benefits of discovery research in green chemistry from Canadian post-secondary institutions, as well as entrepreneurs, should be built upon and generalized to certain other sectors in order to transform innovation in Canada.

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It begins with basic research

All of the major advances in prosperity resulting from science and technology can be traced back to basic research. Basic research can be driven by curiosity, by a desire to be systematic, by a desire for rigor or a desire to accomplish a technical feat. Basic research is, by definition, an enterprise whose goal cannot be fixed and whose final outcome cannot be predicted. And yet, this undirected enterprise has been, historically, a most successful one.

Before I discuss how to better cultivate the economic benefits of basic research, I wish to re-emphasize the importance of properly funding the laboratories, scientists, engineers, students and support staff that perform basic research. We must have have a pipeline of laboratory discoveries that can become the raw material of innovation and economic growth in the long term.

The government must re-commit to basic research and make sure that research infrastructure has sufficient funding for its operation, maintenance, and repair.

From Laboratory to Licence

The capacity to recognize commercial potential and take discoveries from the laboratory to the boardroom is a separate core competency that must be nurtured. It makes sense to have intermediary organizations with scientists and laboratories who focus on that competency, and it makes sense that the business model for those organizations include partial public funding to reflect the public good of this activity.

The researcher understands the scientific or technological novelty of a particular advance, but that must be translated into the capacity to enable change in the commercial context, before economic benefits can be realized.

The researcher often cannot guess the commercial potential of his or her research results. Conversely, industry is often not aware, in sufficient detail, of what research results might be relevant to their business. Moreover, quite often the relevant business where there is commercial potential will be a foreign business. And so to maximize the benefit to Canada, and the Canadian researcher or entrepreneur, it will be important for that Canadian intermediary organization to understand the commercial potential so that, for example, a licensing agreement does not become a transaction negotiated under an unfavourable information asymmetry.

It’s also important to facilitate the two-way flow of information between laboratory and industry. Not only do discoveries power innovation and competitiveness for industry, but from history we know that scientists who are given the time and resources for a deeper investigation of practical problems will make advances in fundamental understanding. Science is empirical, after all. This is something which was encouraged at the large corporate labs of the past, such as Bell Laboratories, who put extensive resources into both basic and applied research. This is rare today.

Finding Long-Lived Business Receptors

Businesses that operate in areas which experience change need to be innovative to survive and thrive. They will be receptive to proposals from sources of innovation. At the same time, working to turn laboratory discoveries into pilot projects that better match the risk-reward profiles required by investors, and thereby attract the attention of boardrooms, can take years. Combining these two ideas, it is long-lived business receptors where cultivating the economic benefits of discovery research has the most promise. Long-lived business receptors in turn will be found in sectors where we expect sustained, continual change.

This point comes from the Canadian Council of Academies report, “Paradox Lost: Explaining Canada’s Research Strength and Innovation Weakness”, which referred to “mega-trends”. What are some of these?

1. The demographic shift associated with the aging baby boomer generation and resulting changes in savings and consumption patterns.

2. Increasing wage and income inequality and the possibility of reversing the contribution of new skill-biased technology to inequality. There is no reason why new technology necessarily contributes to inequality through higher wages for a smaller and smaller class of highly skilled workers.

3. The need, throughout the world, to align economic growth with environmental protection.

GreenCentre

The inspiration for this article and the first organization of its kind, is GreenCentre, located in Queen’s University Innovation Park. It is a CECR that is aligned with a mega-trend by offering services for the commercialization of green chemistry technologies.

GreenCentre’s core competency is identifying discoveries with potential, doing in-house research and synthesis, that pulls discoveries out of the lab and takes them to a point where an industrial partner can test for commercial potential from their own proprietary point of view.  It is composed of a unique combination of in-house scientists, a state-of-the-art synthetic laboratory, industry and investor participants, academic and entrepreneurial contacts, and business development and commercialization experts. GreenCentre has created or enabled nearly 200 jobs, recently won a renewal of its NSERC funding and is moving towards a self-sustaining business model.

Canada should explore the creation of more CECR’s on the GreenCentre model, focused on sectors where Canadian basic research is active, and where “mega-trends” mean we expect long-lived business receptors. The GreenCentre strategy seems like a good strategy for cultivating the economic benefits of Canadian basic research and revolutionizing innovation in Canada.