Ontario could benefit from network of Technology Innovation Centres modelled on Fraunhofer: research paper

By Mark Henderson

Emulating the Fraunhofer Society’s network of Technology Innovation Centres (TICs) will assist Ontario companies with improving their commercialization and innovation outcomes, argues the latest working paper by the Institute for Competitiveness and Prosperity (IC&P). The Toronto-based think tank argues that an Ontario TIC network could “fundamentally shift Ontario’s economic performance by increasing the innovativeness and productivity of Ontario businesses, especially in manufacturing and other goods-producing sectors” preceded by a comprehensive review of the province’s industrial clusters.

In essence, the paper – entitled The final leg: How Ontario can win the innovation race - calls for Ontario to establish a physical network of business-oriented centres offering on-demand services that allow companies and academics to collaborate. The highly successful network of 69 Fraunhofer TICs are centrally coordinated and governed through a “federated and representative power-sharing structure”. The paper argues that TICs would facilitate a non-linear approach to innovation and commercialization and better match the reality of private sector innovation characterized by “incremental innovations, time-consuming searches for research expertise, and both forward and backward linkages”.

“TICs will definitely improve innovation in two ways, says Jacob Greenspon, an IC&P policy analyst and author of the working paper. “It will improve commercialization in terms of taking research and invention in Ontario and making sure it can be better used by Canadian businesses. And it can improve lagging technology adaptation.”

“TICs maximize the impact of other government expenditures on innovation, create jobs from growing more businesses, address the market failures of the commercialization gap, and act as ‘anchors' for community economic development.’”

Greenspon estimates that an Ontario TICs network could be established relatively quickly – about five years – as they build up a base of companies that are able to partner with them, pointing to the Fraunhofer Project Centre at Western Univ. He adds that he also looked at the UK Catapult Centres and the US National Network for Manufacturing Innovation before selecting the Fraunhofer TICs model.

“I chose Fraunhofer because Germany has a reputation of manufacturing excellence and productivity and high wages,” he says. “We have a large number of SMEs (small- and medium-sized enterprises) in the manufacturing sector, and they would benefit the most from this service.”

The IC&P report did not provide any guidance or recommendation on how Ontario would fund a TICs network, but Greenspon estimates it would costs under $1 billion to start. He says more work is required analyzing the province’s industrial clusters and exploring how TICs would work with existing innovation intermediaries. These include Regional Innovation Centres, the National Research Council’s Technology Development and Advancement (TD&A) program and Centres of Excellence for Commercialization and Research. While all have a specific role to play in boosting commercialization and productivity, Greenspon notes that they don’t offer the full range of technological and business advisory services envisioned for TICs.

“Each year, Fraunhofer engages in as many as 8,000 research contracts and earns over $3 billion from contract research, with only one percent of contracts generating a loss. The average contract project lasts 20 months and costs $64,000.”

The Fraunhofer TICs are funded in roughly equal measure by government, private sector contracts and public sector contracts and benefits greatly from Germany’s world class apprenticeship system, the superior ability of German firms to absorb and make use of cutting edge research and technologies, and a fiscal environment that sees local banks lend to companies at relatively generous terms.

Fraunhofer TICs conduct both basic and applied research spanning from discovery to product and process development. They are defined by taking a “consultancy approach” to provide tailored on-demand services to firms. The research agenda of TICs is determined collaboratively by academic researchers and businesses.

“Fraunhofer offers strong central leadership and institutional flexibility,” says Greenspon. “They benefit firms from economies of scale and are governed by the (Fraunhofer) institutes.”

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