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July 8, 2014

From the DEEP Centre’s Report on Billion Dollar Firms: Innovative Public Policies From Other Jurisdictions

Today the DEEP Centre released its report on Canada’s population of billion dollar firms. While much of the report looks at trends, challenges and opportunities facing Canada’s largest and most successful companies, we also take a bird’s eye view of some of the creative public policies other countries are experimenting with in an effort to catalyze economic growth, spur innovation, and help develop globally competitive firms. In this post, I’m going to quickly review three of the policies we identified: Australia’s innovation patent, the growth of collaborative research centres, and the use of strategic public procurement to foster domestic growth and innovation.

Australia’s Innovation Patent

The structure of a country’s intellectual property rights (IPR) regime can either facilitate or impede domestic innovation and economic growth. Recognizing this, the government of Australia has experimented with ways to make the IP system more conducive to innovation. In addition to its standard patent, Australia offers an Innovation Patent which seeks to provide fast and relatively cheap access to patent protection. In addition to increased speed and efficiency, innovation patents require a lower level of ‘inventiveness’ to be awarded. As described in a recent review of the innovation patent system, the objective of the patent “is to stimulate innovation in Australian SMEs” by “providing Australian businesses with intellectual property rights for their lower level inventions to prevent competitors from copying them.” Consistent with this objective, innovation patents have a more limited term (eight years) than standard patents (20 years).

It is, as yet, too early to judge the success of Australia’s innovation patent system. Supporters of the system argue that innovation patents are “useful tools in supporting first to market advantage and are strategically valuable assets in protecting and enforcing patent rights.” Detractors, however, contend that these patents have encouraged abuse of the IPR system. In May of this year the Australian government’s Advisory Council on Intellectual Property concluded a review of the innovation patent.  Though the Council concluded that it did not have “adequate empirical evidence as to whether the system does or does not stimulate innovation in Australian SMEs,” they noted that there was sufficient evidence “to support changes to the system.” In particular, the ACIP recommended raising the level of innovation required for granting an innovation patent, though they argued that it should remain “below the inventive step level that applies to standard patents.” Though the jury may still be out on the efficacy of the innovation patent overall, it is worthy of additional study, particularly insofar as it may make the country a more attractive location for research and development (R&D) activity.

The Growth of Collaborative Research and Innovation Centres

As our report notes, German Fraunhofer Gesellschaft – a network of collaborative research institutions which bring together public and private sectors –  are often cited as a key ingredient in the success of the country’s manufacturing firms. As a result of this perceived success other countries, most notably the US and the UK, are now implementing plans to revitalize their manufacturing sectors on the basis of the Fraunhofer model. As part of its strategy to re-balance the domestic economy by reviving its manufacturing base, the UK government has committed significant funding to establish a series of technology and innovation centres. Particularly notable is the country’s High Value Manufacturing Catapult, which is intended to act as a hub to “help accelerate new concepts to commercial reality” and seeks to bring together “all the members of the UK’s supply chain.” As I’ve previously noted here on the DEEP Centre Blog, the US has also begun establishing a series of hubs geared towards high tech manufacturing.  The long-running success of the German manufacturing model, coupled with the increasing willingness of other nations to invest public funds to imitate it, suggests that Canada should seriously consider the potential advantages of adopting a similar policy framework in advanced manufacturing.

Public Procurement

Other jurisdictions also continue to use  strategic public procurement as a means of fostering innovation and the growth of domestic firms. The Swedish government, for example has historically used procurement as a means of supporting investment innovation through the establishment of long-run partnerships – known as development pairs – between public bodies and private firms. Since 2011, the Swedish innovation agency VINNOVA has had an Innovation Procurement Program. As the agency notes:

“A significant proportion of Sweden’s big companies were built around major public procurement in the mid-20th century. These public innovation procurements brought about strategic alliances between industry and society which, in some cases, endured for decades. Such partnerships are no longer possible due to modern procurement directives. However we can fall back on our experience and use public procurement in the current situation to catalyze innovation in Sweden across a broad front.”

 

In this context, we recommend that Canada further explore the use of public procurement. Indeed, for start-ups and SMEs, enhanced access to public procurement opportunities could be more important even than access to venture financing, by allowing early-stage companies to secure important anchor customers.

To learn more about these initiatives and others, check out the full report on our website.

 

 

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