The final leg: How Ontario can win the innovation race

Released April 2018

Working Paper 31, The final leg: How Ontario can win the innovation race, explores how Ontario’s innovation performance could be boosted by improving commercialization of research and inventions in the province. The Institute examines best practices in commercialization support from the German Fraunhofer Society, which has successfully bridged the gap between early research and large-scale production known as the ‘innovation valley of death’.

The Fraunhofer Society, a network of 69 applied research institutes across Germany, is widely regarded as one of the most successful networks of technology and innovation centres (TICs) in the world. Founded in 1949, the Fraunhofer institutes perform technical and commercialization research on contract to public and private sector clients and develop university and self-generated research into marketable products and processes.

The Institute’s research suggests that Ontario could improve its poor record of commercializing its own research and boost technology adoption by Ontario businesses by creating a network of TICs to bridge gaps in the innovation process.

Key findings:

  • Canadian firms receive $3.9 billion in net payments from abroad for research and development (R&D) services, but pay $8.3 billion to foreign firms for the use of their intellectual property
  • There are 28 percent fewer patents owned by Canadians than invented in Canada (2015) and 36 percent fewer patents owned by Ontario residents than invented in Ontario (2012)
  • There has been a 17 percent decline in business spending on R&D in Ontario since 2000

The Ontario government should support early stage commercialization to bridge gaps in the innovation process by creating a new network of TICs that provide public and private sector clients with expertise and specialized facilities to develop innovative ideas into commercially successful projects.

The Institute recommends that this new network of TICs include five key elements:

  • A focus on research commercialization technical support services for businesses, especially SMEs and manufacturing and goods sector firms;
  • A range of intermediary organizations under one brand;
  • Publicly-subsidized, stable base funding that also encourages TICs to generate revenue through public and private sector contracts;
  • Managed competition and collaboration between TICs; and
  • A federalized system of collective self-governance by TICs.

The Institute makes several complementary recommendations including continued support of basic research alongside the new network of TICs, improved management of intellectual property from Ontario universities, deployment of more demand-pull innovation policies, and the creation of a standing council of federal-provincial ministers on innovation policy.

Topics: Economic policy, growth, and strategy, Business growth and innovation