The Socio-Economic Importance of Scientific Research To Canada

The Socio-Economic Importance of Scientific Research to Canada Page 34© David A. Wolfe and Ammon SalterCreation of New Firms:Often the creation of new firms is cited as one of the key benefits of government–fundedresearch. However, the evidence is mixed as to whether new firms have been created on asignificant scale as result of government funding. There are some spectacular examples ofregional agglomerations of new firms clustered around research–intensive universities. Yet areview of several studies found little convincing evidence that significant investment in basicresearch generates a large number of spin–off companies. Research in the US has revealedmixed evidence as to whether funding for basic research in university leads to firm growth. Inthe electronic equipment sector, the correlation between university research and firm birth ispositive and statistically significant, while in other sectors it is statistically insignificant (Baniaet al. 1993). 23New firm growth is not, however, all important. Often the companies createdby spin–offs remain quite small and have a high failure rate, for example, software companies.These companies can provide an important source of Schumpeterian clustering around a newtechnology, but simple head counts of numbers of new firms can be misleading. Firm entryand exit rates vary considerably between sectors and regions. Moreover, many of the firmswhich are spun out of universities have low growth rates (Massey et al. 1992). Studies offirms located in science parks indicate that a connection to a university can be advantageous fornew small firms, but this advantage is often quite limited (Story 1994). Successful andsustained innovation is more the development of an idea. “Academics do not make goodentrepreneurs and the effective exploitation of their technology usually requires that theownership of the technology and the managerial control are taken out of their hands at an earlystage” (Stankiewicz 1994, p. 101).FEDERAL POLICY WITH RESPECT TO R&D INVESTMENTAs we noted at the outset, the question of Canada’s level of spending on research anddevelopment has been the subject of numerous inquiries and policy initiatives over the pastthree decades. The consensus has been that Canada suffers from an underinvestment inresearch and development and numerous attempts have been made to improve this situation.Federal support for investment in basic research has grown from a small base in the early partof the century to become a central part of the country’s overall science and technology policyframework. From the creation of the National Research Council in 1916, it assumedresponsibility for providing financial support for scientific research at Canadian universities.Over the next six decades, until this responsibility was transferred to the Natural Sciences andEngineering Research Council (1978), total expenditures on scholarships and grants grew to23 This study ignored firm deaths.34