Canada’s business investment in research and development (R&D) is lower than in other advanced economies, a fact that has long preoccupied policy-makers. The question of how we can grow innovative companies that go on to become global leaders remains at the forefront of the policy agenda. Federal governments have since the late 1970s promoted a reorientation of our research system into one that emphasizes collaboration between universities and industry. Canadian research policy has thus relied on creating incentives to encourage academic researchers to work with businesses on new technologies.

This trend has been consistent between Liberal and Conservative governments for nearly four decades, and has resulted in a redistribution of federal research budgets toward applied R&D and innovation since the 1980s. One of its consequences, as recently shown by the Fundamental Science Review, has been the shift in funding away from investigator-initiated projects and toward industry-driven programs. Budget 2018, recognizing that the pendulum has swung too far from fundamental science, provided additional funds for basic research, and yet new investments of over $1 billion to support business innovation through granting councils and federal agencies demonstrate the continuing priority given to university-industry partnerships.

Despite burgeoning support for such collaborations, the story of Canada’s lagging business expenditures on R&D remains relatively unchanged. This poses a significant conundrum for policy-makers, which was also acknowledged in a recent Council of Canadian Academies expert panel report: “The trend towards increased collaboration and partnerships between industry and higher education institutions combined with flat business expenditures on R&D in the higher education sector remains a puzzling anomaly that is not fully accounted for in existing data or research available to the Panel” (23).

The long-term pattern of underinvestment in R&D by Canadian firms is clear, and raises questions about ongoing federal investments in university-industry partnerships. Do they address the problem they are designed to solve?

Questioning the basics of policy instruments

To gain insight into the issue, we took a first step by looking closely at the logic informing federal programs for academic-industrial collaborations. In our recently published study, we probed the fundamental assumptions behind two well-established and important partnership programs administered by the Natural Sciences and Engineering Research Council (NSERC). We wanted to tease out the underlying logic behind these programs and how it translates into practice.

Our study highlighted disconnects between what these programs aspire to do and what happens in practice. We arrived at our conclusions after a deep examination of several data sources, including program-related reports, 25 years of funded projects and in-depth interviews with new as well as long-term users. The first disconnect is between the emphasis on generating commercial outcomes and how projects are assessed and funded. The second is between the overarching goal of harnessing innovation in the economy and the sizable participation of large incumbent firms in traditional sectors performing incremental work. The third disconnect is between the assumption that partnership programs support value-added, mutually beneficial projects and the situation of academic investigators who rely on industry collaboration to make up for funding shortfalls. These three policy implications of our results suggest the need for a better understanding of both firms and university researchers in program review and design.

Projects and business strategy

We found that projects must be assessed in the context of an industrial partner’s ongoing business strategy. This stems from the fact that the results of a university-industry partnership project are not a finished product, but quite the contrary — they require firms to make the necessary investments to bring those results to the marketplace. Hence, the ultimate “success” of an investment in these partnerships hinges on the interest and ability of businesses to see through the development and commercialization of the research results after collaborations end. This will happen only if the R&D projects match the business strategy of the project participants, which could be swayed by factors outside of the immediate control of the project. Smaller firms are particularly susceptible to change and pivots as they grow and find their footing in the marketplace. While these are realities for businesses, they may render previously committed R&D projects useless if they no longer match the firm’s strategy.

Here the challenge for sponsoring agencies at the proposal stage is to determine not only the intrinsic merit of the proposed R&D, but also the plans and capability of partner firms to commit to the further development of inventions and their subsequent commercialization. On one hand, this would require application requirements and review processes to include these elements and make them central to evaluation. On the other hand, quick turnaround times from funding applications to decisions would minimize the potential for projects to lose relevance to industry partners.

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Our analysis shows that investments in certain programs overwhelmingly benefit firms in Canada’s traditional industries, with strong participation of large incumbent firms. For instance, large natural resources and energy companies represent 12 out of the top 20 nonacademic partners whose projects have received the largest investments in NSERC’s Collaborative Research and Development program over a span of more than two decades. It is easy to understand why: these companies have the resources to join university researchers in collaborative projects. However, the extent to which these companies draw on the investments from these programs raises legitimate questions about whether they are “crowding out” smaller firms.

We will not change the makeup of our economy by subsidizing incremental R&D in traditional sectors. Program administrators have to make a conscious decision in their selection process to support growing and innovative firms, precisely the ones that will help diversify the industrial base. This also involves long-term tracking of users to understand exactly the breakdown by size and sector of businesses that benefit from publicly funded programs.

Partnership programs cannot be substitutes for basic research funding

We found that the state of the Canadian funding environment has had a meaningful impact on researchers’ participation in university-industry programs. The Fundamental Science Review described the deterioration of budgets for investigator-defined research across granting agencies. This shortage of funding for field-initiated research led investigators to depend on partnership grants as a source of funding to maintain their labs and afford basic research costs. That is not the goal of university-industry partnership programs, which would ideally generate mutually beneficial relationships that add to and enhance investigators’ fundamental work and graduate training, while contributing to solving problems relevant to firms. If our federal agencies seek to harness these partnerships for the value-added they create rather than as funding stopgaps, then academic researchers must not depend on these programs as a substitute for basic research funds to run their labs. That hinges on the ability of the federal government to support a healthy research budget and resist the temptation to seek short-term innovative outcomes from larger and larger fractions of investments in science.

Much research shows that university-industry collaboration can be mutually beneficial to the partners and generate positive impacts to the economy. However, policy tools to stimulate these interactions cannot be taken for granted, as they may fail to accomplish their goals and even create adverse unintended consequences. Some of our most established partnership programs have been in use for decades, and programs with similar “recipes” for innovation have multiplied. The time is right for Canadian agencies to revisit their partnership programs: the federal government has expressed its intention to simplify and consolidate business support, and NSERC is also overhauling its partnership programs and has put forward a new framework for consultation with researchers and other users. We should make sure that programs to encourage collaborative R&D involve the right organizations and deliver long-term results that help address the fundamental problems they are meant to attack.

Photo: Shutterstock, by Foryoui3.

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Emina Veletanlić
Emina Veletanlić is a PhD student at the University of Toronto’s Centre for the Study of Canadian & International Higher Education. Her interests include research policy and emerging technologies.
Creso Sá
Creso Sá is professor of higher education and director of the Centre for the Study of Canadian & International Higher Education at the University of Toronto.

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