Madam Chair and committee, thank you very much for inviting me to speak on the evaluation and promotion of innovation.
You've heard from a number of eminent practitioners of innovation and innovation management in the health sector in Canada. As a researcher in innovation and the benefits of R and D programs, I would like to speak on a more theoretical basis perhaps, rather than speaking to the specific examples that have been raised so far.
Innovation is both on the one hand very easy, and on the other hand very hard, to measure and evaluate, regardless of whether we're talking about innovation in the health sector or other sectors. R and D is a subset of innovation. Much of this committee's interest has been focused on how Canada's health care system can be improved through innovation. But let's start with R and D.
R and D is of interest because it is an indicator of innovation. The OECD realized this 50 years ago and that's why we've been measuring R and D expenditures ever since. It's relatively easy to measure the resource inputs for R and D—funding and people—and it's usually possible to quantify the outcomes: academic papers, patents, licences, formalized intellectual property, and other economic benefits. I'll just ask you to bear in mind the simplified definition of R and D, and I'm quoting from the Income Tax Act: R and D is the ”systematic investigation or search that is carried out in a field of science or technology by means of experiment or analysis” to advance scientific knowledge or achieve technological advancement.
Okay. But what about innovation? Innovation is both more flexible, as I said, and also harder to define. According to Schumpeter, innovation can be in one or more of five separate areas: new products, new processes, new forms or methods of organization, production, or new sources of inputs.
While the first two, new products and processes, are the main scope of this committee's work, the other forms of innovation should be part of this discussion. But there are other views. Everett Rogers in his book, Diffusion of Innovations, wrote about the transmission of ideas. For Rogers, innovation is not a single, well-defined change like Schumpeter's catastrophic innovations, but a series of small changes, which add up over time to a significant change. Innovators take ideas developed by inventors, researchers perhaps, and communicate them to the individuals who actually implement them. Thus, there can be three separate players in the adoption of an innovation.
As I said, it's relatively easy to measure the effectiveness of some R and D, and thus the consequent innovations. In the health sector, R and D is usually formalized in patents and licences, codified knowledge that can be bought and sold. But there are even problems looking at this simple model, particularly in terms of evaluation. The knowledge from some research does not generate measurable benefits for decades. How far into the future do we try to measure the cost-benefit of research? Some research generates negative results. These are usually unsaleable. Yet the knowledge of what does not work is often as important as the knowledge of what does work. Furthermore, when a patent or a licence is bought by venture capitalists or whoever, the seller still retains the knowledge of what did not work. That's maybe one of the reasons why larger firms tend to purchase or acquire the firms, rather than simply trying to acquire individual pieces of intellectual property.
Arguably, most research, whether in universities, government, or industry, results in tacit knowledge, the knowledge that is retained in the heads of the researchers. Research is a lifelong learning process, and researchers accumulate knowledge even if periodically they have to divest themselves of specific pieces of knowledge to others who can exploit them, either commercially or non-commercially.
But innovation is trickier. How do you measure the improvement of a product or process? This can be done, but often, again, the benefits accrue over time, not the span of a single fiscal year. Sometimes, as with some research, there are clearly identifiable benefits, but innovation can be incremental with small changes accruing over years, which may or may not have measurable benefits in that period. How does one measure the small day-to-day changes in operating procedures in the hospital, at the end of which year might result in better health outcomes or lower costs? How do you identify which innovation was significant? More importantly, how do we know who was the innovator and reward them appropriately?
Following the Jenkins report, we were asked to carry out a study on knowledge transfer from university-based R and D to the productive sector. There were some interesting results. These are very preliminary, and they're not in any particular order of importance.
First, Canadian university IP, or intellectual property, policies are at best inconsistent. Given that there's no nationwide standard university IP policy, industry is often reluctant to involve universities in R and D projects, since they're uncertain as to what the IP requirements might be, or how long it will take to negotiate an acceptable IP arrangement.
There are many anomalies in these policies. For example, most universities have no policy regarding the IP rights of students, whether graduate or undergraduate students, yet students are an important part of the knowledge production process.
We didn't look at this as part of the study, but I will contrast the IP situation with ethics. There is a relatively consistent national policy on ethics, but even here, ethics approval by one university does not guarantee approval by other members of a research consortium. One of the things that bedevil all researchers, not just health researchers, is the need to get separate ethics approval from each university that's involved.
Another thing that came out of the study is the need for what we call “intermediary” institutions, for want of a better term. Other nations, such as Germany, have institutions that come between industry and the higher education sector, and act as a filtering mechanism. We have a couple in Canada that I can point to—MaRS, whose president you heard from earlier, and FPInnovations—but there are not nearly enough. In Germany there's a whole system, what we collectively call the Fraunhofer institutes, but in fact it is a system that goes under a number of different names. Yet we know that already the Fraunhofer institutes are expanding into Canada and that one institute has already set up in Ontario.
We need to recognize that the principal role of universities is to create human capital. The generation of knowledge for specific purposes should come from somewhere else, perhaps these intermediary institutions.
I don't have the figures for Canada, and indeed I don't believe they exist in Canada, but the Royal Society in the United Kingdom has data that show that less than one-half of 1% of all science Ph.D. graduates ever become tenure-track professors, but 17% of Ph.D. graduates become researchers in industry and 50% of Ph.D. graduates in science enter the workforce in other capacities that are unrelated to science.
The question I would like to leave with the committee is this: who are the innovators, and how do we foster innovation by encouraging innovators?
Innovators are frequently entrepreneurs, and entrepreneurs, by Schumpeterian definition, are innovators. But there are other types of innovators. There are social innovators, people who innovate not for profit but to improve the human condition, such as innovators in not-for-profit organizations.
There's also another category we need to encourage, and that's intrapreneurs, people who work in large organizations such as governments but who are unlikely to receive major economic recognition for their efforts.
Can we train innovators? Arguably, yes, but the average researcher, particularly the average health researcher, has such a long training period that adding to their required program of study would probably be counterproductive. Indeed, some researchers and inventors will never likely make good innovators or entrepreneurs. History is full of examples where inventors never acquired any recognition from their R and D, but where other individuals, innovators, saw the potential of their work and exploited it.
Most university tech-transfer programs struggle to generate enough revenue to maintain their programs. One of the thoughts I would leave you with is that the tech-transfer officer should be encouraged to seek out problems as well as to offer solutions. In other words, they should be pulling ideas in as well as trying to push ideas out. One of the participants in our project referred to this as encouraging R and D “enablers”, and thus, of course, innovation enablers.
What can the committee do? I would suggest it recommend that universities not be pressured to produce codified knowledge—that is, patents and licences—but be encouraged to produce the very best human capital for the nation.
I'd recommend that you consider means to recognize and reward social innovators and intrapreneurs.
I would recommend that universities adopt similar, but not necessarily identical, sets of IP policies, perhaps similar to the way the ethics approval system works but without the consequent need for approval by each institution in succession.
Finally, the policy-makers recommend that this should be a two-way street: encouraging a demand for R and D, as well as looking at the supply of R and D in the health sector, whether directly or through intermediary institutions.
Thank you.
