Conference Board report cites innovation potential of medium-sized firms

Innovative medium-sized firms could be Canada’s best bet for increasing productivity and business, and governments need to create new strategies tailored to their needs, says the latest innovation report from the Conference Board of Canada (CBoC). It also calls for medium-sized enterprises (MEs) to be treated distinctly from their smaller counterparts and for Statistics Canada to collect “more nuanced economic data” specific to MEs.

Entitled Don’t Overlook MEs: Medium-Sized Firms Show the Way to Global Success, the sixth annual innovation report contends that 16% of MEs can be classified as high growth and are more likely to perform in-house R&D, move products to market faster and report higher profits.

Access to public support should be contingent upon the medium-sized company’s ability to demonstrate that it has globally superior niche products with a high commercialization potential. The payoff, the report says, is greater R&D spending by firms that tend to have a propensity to achieve high research intensity.

“Medium firms are punching above their weight, spending almost as much on R&D in the manufacturing sector as all small firms, despite the fact that there are substantially more small firms,” states the report. “When R&D expenditures are considered as a share of revenue, we find that small and medium firms invest a larger percentage of corporate resources in R&D than do large firms.”

But without more insight into their unique characteristics, the report says it’s extremely difficult to develop an effective suite of incentives.

“Until the distinct nature of medium-sized companies is both recognized and celebrated, it will be difficult to unleash their innovation potential,” it states.

One area where MEs may require assistance is in the area of acquiring experienced personnel and devoting their expertise to R&D projects. The report says nearly two thirds of MEs report staffing challenges as an obstacle to innovation, versus 54% of small firms and 53% of large firms.The challenge is significant since high growth MEs appear to be characterized by superior institutional and technical capabilities achieved by high-performing staff.

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