Tyler Chamberlin

The challenge of developing high-tech firms

By Tyler Chamberlin

The recently formed Ottawa-Gatineau Commercialization Task Force (CTF) knows what it wants to do: help existing small- and medium-sized firms with sales of between $1 million and $3 million grow to be the next Cognos, Mitel or maybe even JDS Uniphase. It intends to do this during one of the most pronounced downturns internationally in technology industries ever, and before the $3-million worth of venture capital that has flown into the region over the past three years runs out. In short, develop a new group of global players out of the existing group of over 1,000 technology firms presently in Ottawa.

This is not nearly as easy as it sounds. The question is one of innovation, though not necessarily technological innovation. The answer could rest in many different places, including the marketing activities of firms or the network of actors that are required for most innovations to occur. Almost every study of innovation notes the diverse array of activities and interactions between people and organizations required to produce a valuable innovation. From idea to development to sales, innovation is best viewed as a process that requires many contributors, but not always the same contributors.

This makes the job of regional and national innovation policy makers difficult. How does policy assist in a process that is best described to be different every time it happens? Traditionally, policy makers have addressed this challenge with a preference for focusing on the earlier stages of the innovation process and allowing the different paths to emerge on their own. This included the funding of university research where new ideas where conceived and incentives for firms to do their own R&D through instruments like the scientific research & experimental development tax credit (SR&ED).

But to get Canadian technologies and innovations to the global marketplace, we must address the latter stages of commercialization and the relative lack of government support towards this stage. This is where the CTF is focusing its attentions.

If innovation policies have tended to avoid the issue of supporting and assisting the later stages of commercialization within firms thus far, does the new CTF have any hope of making a difference? The definitive answer will come later, but there are some reasons to be optimistic in these early days.

First, the approach that the CTF is taking is faithful to the broad understanding of an innovation system. Multiple organizations and contributors are required for most innovations to occur. Those who have worked with an innovation systems framework will know that these organizations and contributors come from the public, private and academic sectors. The CTF has representatives from each of these areas and these groups have been collectively involved in setting the agenda for the CTF. From a governance standpoint the CTF appears to be structurally robust.

Secondly, the issues being discussed are not constrained exclusively to public sector support of industry. In practice, innovation systems are the result of all players taking action. An example of an output not related to the federal government’s support for commercialization could be adjusting the curriculum of local business schools.

Jeffrey Dale of the Ottawa Centre for Research and Innovation (OCRI) – a leading member of the CTF – has suggested that sales should be given greater emphasis in our training of future managers. This could include the creation of sales specializations within undergraduate and MBA programs. If we are not seeing enough sales-oriented or entrepreneurial managers entering the labour force, this would make sense. Commercialization is fundamentally driven by people and leadership can be trained.

2ND GENERATION ISSUES

A third point is the discussion of second-generation clustering issues. These should be seen as distinct from what I would suggest are first-generation clustering issues which focus around the identification of economic clusters of activity and/or how to create a high-technology cluster in a specific region. These first generation issues are undoubtedly important and have already been given a great deal of attention by governments, consultants and academics.

The idea of second-generation clustering issues may seem to be in conflict with the term ‘critical mass’ that is often used to describe industries within a region that have grown to a self-sustaining size. The telecommunications industry in Ottawa, for example, might be seen to be large enough to take care of itself and therefore we can take our foot off the government support ‘gas pedal’ and it will keep running. It is here, however, and similar to most analogies that are taken from the world of biology to describe economic processes, that the analogy breaks down.

History is punctuated by regions that have grown to a level of economic strength only to be followed by prolonged periods of industrial decline, with the later stage often lasting longer than the original boom. A region’s ‘critical mass’ can be used up in a fairly short period of time if it is not continuously attended to. Add to this the reality that global firms and global industries today rarely operate without any form of support by governments. We must realize that Ottawa’s technology industries are strengths to build from – not to rest upon.

The types of support that larger more established clusters require are different from those that are either being ‘parachuted-in’ or ‘grown from seed’ – the latter being clusters that are being started from some sort of local or regional advantage such as access to certain raw materials or a concentration of highly qualified individuals. In established clusters, the focus of attention by regional leaders (in business and government) should shift towards strategies aimed at utilizing all the resources (both recognized and potential) that the region has to offer and addressing areas of local weakness (even if they exist within firms) as they arise. This appears to be where the CTF is headed.

In a region known for meeting but not necessarily communicating, the CTF is an important new initiative. The structure it has taken and the issues it’s addressing give us reason for optimism. If it is successful in dealing with these issues of commercialization, it will provide valuable insights for other regions on this topic, which is of trans-Canadian consequence and magnitude.

Tyler Chamberlin is a lecturer at the School of Management and a researcher in the Program of Research on Innovation Management and the Economy (PRIME) at the University of Ottawa.